As disturbing as the past year has been in personal finance, 2023 threatens to be worse.

A huge wave of interest rate increases hit this year. Next year, they really sink in. The cumulative impact of higher payments on mortgages, credit lines and floating rate loans will challenge households to maintain their lifestyle without incurring more debt, and slow the entire economy.

One way to ease your way into 2023 is to keep a firm grip on your holiday season spending. You won’t find the religion of frugality preached here. Ya gotta live, I say. But there are ways to stay in control of your spending so that you don’t spend January regretting December. Here’s a 10-pack of ideas for you:

Avoid BNPL

Buy now, pay later is an option that many retailers and some credit card issuers offer where you pay for a purchase with equal payments over weeks or months, often with no fees or interest. It’s hard to imagine a more direct path to financial stress in 2023 than juggling multiple BNPL gift purchases. BNPL also adds a layer of complication to getting refunds on gift rejects.

Follow a zero-debt policy on gifts

Figure out how much you can reasonably spend and treat that limit like a concrete wall. Nothing goes on your credit card that you don’t already have the money for. Ideally, your credit card bill with holiday season expenses arrives in January with a zero balance because you paid off your card purchases as you made them.

Gift cards are great

You can size them to your budget – that’s one benefit. Another is that they’re pretty much like cash, and thus likely to be welcomed by gift recipients feeling financially strapped. It may sound unimaginative to give people grocery or gasoline gift cards, but who doesn’t buy food and gas? An Amazon gift card is like cash to buy almost anything.

Charitable donations as gifts

Again, you can scale the donation to your budget. Your reward is a charitable tax donation, while your recipients appreciate the idea that you’ve done something good in their name for a meaningful charity.

Use credit card points for merchandise

Merch is usually a second-best way to use credit card loyalty points compared with travel. But if you have points kicking around, you might be able to use them to buy presents with no out-of-pocket cost. Keep an eye out for credit card promotions offering items for a reduced number of points. American Express recently offered points reductions of 30 per cent and up on electronics, kitchen equipment and more.

Do a Secret Santa thing

Instead of everyone buying for everyone, try a gift exchange where each person buys for one other. There’s an app for that – Elfster, where you can organize a Secret Santa exchange and match gift givers and recipients.

Let deflation work for you

Inflation is still way too high, but there are niches where prices are falling. The latest Statistics Canada numbers on the cost of living shows that prices for digital computing equipment and devices fell 9.1 per cent on a year-over-year basis, while video equipment was down 10.6 per cent.

Be upfront about your money situation

Everyone knows interest rates have surged and that borrowing costs are way up. You won’t be judged – higher rates affect a cross-section of people who did nothing more than buy a house or dip into that most useful of borrowing tools, the home equity line of credit. Grab onto that storyline to explain why you’re making it a year of restraint on gift-giving.

Start saving for the 2023 holiday season now

Save $38.50 per biweekly paycheque and you will have $1,000 plus interest to spend on the holidays next year. Keep the money in a high interest savings account with rates of 2 to 3 per cent or better.

Skip Boxing Day

Big Retail will tempt you with blowout savings and door crasher specials. Stay home and binge a TV show while other people buy the junk that couldn’t be sold at the usual price.

The Globe and Mail, December 5, 2022