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It seems Canadians are doing a better job of sticking to their holiday budgets this year. In a recent poll on holiday spending, Consolidated Credit Counseling Services of Canada found that nearly 50 per cent of respondents do not want to incur any debt that they can't afford to pay back. In fact, most of those surveyed plan to only use cash or debit instead of credit cards for their holiday shopping to avoid going into the red.

"Canadians have no buffers in their budgets," says Jeffrey Schwartz, executive director of the non-profit agency. "Debt management education is critical at this time if we are to learn how to protect ourselves from potential financial ruin."

Sadly, the same survey found that 30 per cent of respondents were carrying balances of over $1,000 from previous years' holiday shopping. Mr. Schwartz recommends that shoppers use a list to help prevent impulse purchases and check flyers and websites to compare prices before heading to the malls.

For those who give in to temptation and wake up with credit hangovers in the New Year, David Kuo, vice-president of the Toronto retail branch network at HSBC, has some suggestions.

First, he says, we need to make some resolutions and set smart financial targets for 2011. Our priority should be paying down our debt. Make a plan to pay down credit cards and lines of credit each month. Keeping in mind that lines of credit have lower rates than the plastic in your wallet, it usually makes sense to pay off credit card debt first or rebalance where your debt is held.

The next step is to create a budget. Each family should look at their bills together to set a reasonable budget, recommends Mr. Kuo. "Involve the kids - they can be good watchdogs to make sure parents' spending is in line, down to what kind of cereal to buy and what grocery store to shop at."

Then, look for ways to trim back expenses. Although costs vary from family to family, we all have variable and fixed expenses. Variable expenses, such as restaurant meals and entertainment, go to the top of the chopping block. "Have a family discussion about how many movies to go watch and how many times to eat out and limit them," Mr. Kuo says. "Once it's limited, people treasure that even more."

Even expenses that most of consider to be fixed, such as banking charges or insurance fees, should be reviewed. "If we can spare a bit of time to make a comparison, these costs can be trimmed down."

Once the budget is created and expenses are under control, it's time to plan ahead. "Think about how to save money for a rainy day and create savings for future spending," says Mr. Kuo. "Often we think that the only way to spend is using credit cards." If you haven't already done so, open a high-rate savings account and maintain a monthly investment plan. Mr. Kuo's customers often tell him they appreciate the push to save on a monthly basis.

The best way to avoid debt in the first place is to adopt a "pay yourself first" strategy. "When we make a commitment to pay ourselves first, it helps us when we want to spend," Mr. Kuo says. "We realize there are opportunity costs. That $1000 for a big screen TV could be an RESP contribution for the kids."

Perhaps the best resolution you could make for your family in 2011 is to live within your means. It's hard to beat the gift of a sound financial future this holiday season.

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