Budgeting for Christmas in October

October is upon us. Now that we've gotten back-to-school under our belts, many of our minds will be moving on to Thanksgiving festivities. Or Oktoberfest. Or the fall TV schedule. Or hockey season or baseball playoffs or Halloween, with its costumes, candy and scary flicks.

But is anyone out there thinking about Christmas?

Thinking about December holiday spending in early October just seems wrong. Even stores don't usually launch their candy-canes-and-carols marketing onslaught until November 1st. But for many Canadians, holiday spending will put them into a financial hole that can take months to dig out of.

According to a 2010 TD Canada Trust survey, the average Canadian will drop $587 on food, gifts and entertainment this holiday season. For those of us who are living paycheque to paycheque with a fork-load of debt, those extra hundreds of dollars will only weigh us down further come January.

As reported by Noreen Rasbach in Home Cents last year, an Environics survey found that 23 per cent of Canadians said they would finance their purchases of presents on credit cards while four per cent even said they would cash in some investments to buy gifts. Nearly half of those surveyed said they would pick up a little something for themselves while shopping for others.

It's easy to get caught up in a holiday shopping frenzy. To avoid racking up debt you will have a hard time paying off later, save $5 a day from now until December 25th, says Consolidated Credit Counseling Services of Canada Inc. With a little discipline, you might welcome January with no holiday shopping debts.

"Canadians are in this financial trouble because most subscribe to the 'I see it, I want it, and I buy it' philosophy of holiday and everyday spending," says Jeffrey Schwartz, executive director of Consolidated Credit. According to Mr. Schwartz, shopping on impulse and using credit to pay for purchases are sure ways to make bad financial situations worse.

"If Canadians make a holiday season budget before they start shopping, they will have a better chance of controlling their spending, and not incurring any additional debt," he said.

Here are some tips from Consolidated Credit to keep that post-holiday financial hangover at bay:

1) Have a set amount of money (the aforementioned $5 per day or whatever you think you can afford) automatically taken from your bank account and deposited into a holiday shopping bank at regular intervals. You will be unlikely to notice the daily deficit, and it's less tempting than a coffee can in the kitchen cupboard.

2) Be like Santa and make a list. Figure out all the people you need to buy for, then determine how much you want to spend on each gift.

3) Add up your total and see if you can afford that amount without using credit. If it's not looking good, reassess. After all, the holidays aren't about proving how extravagant you can be, right? Some might suggest you use your credit cards to take advantage of Air Miles or other points programs. However, if it will be too tempting to go over-budget or simply not pay off your debts, leave the credit card out of your shopping plan.

4) To reduce your gift-giving commitments, suggest a Secret Santa gift exchange instead of the "everyone-buys-for-everyone-else" scenario with family members or work colleagues. I find buying for children can really get out of hand -- do you really need to get gifts for each of your friends' kids?

5) Look for deals online, check store flyers and use money-saving coupons (another reason to start your planning early).

6) You knew there would be a tough one: Buy only what you need. Stick to your plan and don't splurge on yourself. You'll be getting plenty of gifts in a couple short months -- do you really need something new right this minute?

7) Plan where and when you will shop. Schedule a few shopping days well before that "last-week-to-go" crunch. It will allow you to comparison-shop, find better deals and avoid impulse buying, because you won't be grabbing madly for a pricey gift just because you're desperate to find something that mom/dad/Aunt Loretta is going to like.