Do you fear what I fear? How to avoid a post-Boxing Day debt hangover

You've decked the halls, splurged on the presents, cooked the Christmas turkey and scoped out the Boxing Day sales and the last thing you probably want to do in the midst of all that is worry about how much you've spent.

And while financial advisors recommend coming up with a plan to tackle post-Christmas debt and avoid overspending next year, it seems a lot of us try to ignore the problem until it's become a bigger problem.

The majority of people, I would say, probably don't plan ahead and have the debt hangover in January.-Sandra Fry,Credit Counselling Society

"What we hear from people is there's an enormous amount of stress and peer pressure and family pressure to spend money on presents and entertain during the holidays, and people are in such a rush that they go out and spend money without thinking about the budget," said John Silver, executive director of Community Financial Counselling Services in Winnipeg.

In fact, he says his organization actually sees its client load drop during the holidays.

"People don't come to us and say, 'It's Christmas, what am I going to do about money?' We see them in the end of January, middle of February, when the credit card bills start coming in."

He says his clients often have maxed out credit cards, and those without credit cards might have dipped into other lines of credit or taken out payday loans.

Sandra Fry, a Winnipeg-based credit counsellor with the Credit Counselling Society, sees much the same thing.

"The majority of people, I would say, probably don't plan ahead and have the debt hangover in January," she said.

A recent survey from Prairie Research Associates found that Manitobans spend an average of $654 on presents. Earlier this month, Statistics Canada released data showing that the debt burden among Canadians reached a record high of 171.1 per cent of disposable income in the third quarter of 2017.

Don't ignore the debt

The most common mistake people make when faced with a large debt is ignoring it, Silver said.

"I think they're afraid [and think] that maybe if I ignore it nothing will happen, it will just go away or they'll leave me alone, or they'll forget about it," he said.

That creates its own pressure, Silver said. "People get stressed out thinking about the debts and not opening their credit card. It can put people under tremendous stress."

Another common mistake people make is consolidating debts with a higher-risk lender, like a payday loan company, with much higher interest rates than a regular bankwhich often won't consolidate debts from other financial institutions.

"Some people think that this is a great idea to go to a higher-risk lenderand just have one payment, but what they don't realize is the cost of borrowing," Fry said.

Addressing the issue early and coming up with a budget are essential to managing post-holiday debt. "Your creditors are probably much more likely to look at solutions now than they will if you've ignored it for six months," Silver said.

Fry advises people to go back to their budgets and find ways to cut back on non-essential items, meaning anything not related to food, housing and transportation.

"Anything that's not a necessity is an area they can look at 'OK, so can I give this up for a few months till I can tackle this Christmas debt?'" she said.

As a general rule, Silver advises people not to take out more debt than they can pay off by their next payday.

"If you can budget so that you can pay off your credit cards, whether it's the full amount or an amount each month including the interest, then you're OK. But people usually don't think about that when they're spending the money."

Start planning for next year now

Once this year's debt is paid off, both Fry and Silver recommend making a budget for next year's Christmas spending, andsetting aside some money each month.

We may be really careful spenders but if you're stressed, if you're under pressure, your behaviour changes and you don't act quite as rationally as you do when you're not stressed.- John Silver,Community Financial Counselling Services

"How many people do you have to buy for? What's the limitation on gifts? There really should be limitationsotherwise you get in trouble, it's just a free-for-all," Fry said.

Another tip don't procrastinate on your Christmas gift shopping. "We may be really careful spenders but if you're stressed, if you're under pressure, your behaviour changes and you don't act quite as rationally as you do when you're not stressed," Silver said.

If you feel like you can't manage the debt yourselfand the bank can't help you, then it might be time to seek out the services of a third party, like a credit counsellor.

"It's never easy and the solutions are sometimes difficult, and the solutions mean doing without some things that you're used to having," Silver said.

"But it's much better to deal with it now than to wait for the interest to compound over time and the debt just grows."