Article written by Jackie Porter
While children spend the holidays with visions of sugar plums dancing in their heads, adults are dreaming of the hefty price tag that comes with the season. Especially following a divorce when your relationship with money may look a bit different, this time of year can put a lot of pressure on your finances. But what about when the giving season gives back?
After receiving cash and various gift cards with your holiday greetings, things are looking up. But as tempting as it may be, don't plan your shopping spree just yet. Tis the season to make the most of that money with the following financial tips!
A Word On Gift Cards:
You may wonder how you can use a gift card to your advantage. Well, look no further. Gift cards are a great way to pay for this year or next year's gifts. Whether for an upcoming birthday or a holiday surprise, use your gift card instead of making an out-of-pocket-purchase. You may also consider simply regifting the card all together. Either way, it saves you from putting the purchase on your credit card.
If you do decide to keep the gift card for your own uses, consider how you can maximize its value. Shop at the retailer when items are on sale, or even pair it with a coupon. Everyone deserves to treat themselves every once in a while. This just allows you to get the most bang for your buck.
Divorce & Catching up on Missed Support Payments:
Following a divorce, you may be ordered to pay spousal support or child support. If you find yourself falling behind on these payments, the Family Responsibility Office (FRO) can garnish your wages, bank account, or file a write of seizure and sale against assets of your own. Before you panic, the cash gifts you received may be just what you needed this holiday season. Put that money straight towards your support payments before things get messy. Remember, missing support payments and making no effort to catch up could result in you losing your driver's license and passport. You also risk being reported to any professional organizations you belong to.
Post-Divorce Paying Off Debt:
The holiday debt hangover is real. If you have accumulated debt from your own holiday shopping, a good use of cash gifts would be paying off these debts and avoid paying interest. January comes sooner than you think. Remember, credit card interest rates are typically in the double digits. These are some of the highest interest rates you can pay as you work toward getting your finances back on track.
Whether from holiday shopping or maybe some left over debt you've been facing since your divorce, paying off any current debt should be a priority.
Debt can rob you of your opportunity to stabilize your financial situation and build wealth. Typically, money being put toward debt and long forgotten purchases can linger as interest and the debt continues to grow. Consider using your cash gifts to make a lump sum deposit on current debts so that high interest debt on your loans can be paid sooner rather than later.
Setting Up a Post-Divorce Emergency Fund:
They say the average Canadian is just one pay cheque away from calamity. Are you one of them? Especially following a divorce when you moved from two incomes to one, you may not have a financial cushion to fall back on. A major emergency may lead you to take on more debt creating a vicious circle of more and more financial uncertainty. Your newfound cash can become a down payment toward building long term financial security.
Using the Cash to Invest in your Career:
Many people realize they are being held back at work or else have missed out on promotion opportunities. Could your cash gifts finally help you upgrade your skills by taking additional courses? Investing in your career can help improve your job satisfaction while also contributing to an increased earning potential over the long run. Talk about the gift that keeps on giving.
Funding Long Term Investment Goals:
Now that you have some cash, on hand you may want to use it to kickstart your long-term investment goals. This might include saving towards a down payment for a home or retirement. Remember, when it comes to saving for a long-term goal, every little bit helps! You may also want to consider using an RSP or TFSA account when making long-term investments so that you can shield the future growth in your account from taxes.
Use the Cash Guilt-Free!
If you feel you have been responsible all year and you have already taken advantage of all the strategies above, then we have some good news! Splurge on that item you have had your eye on with your found cash instead of credit! You can also set aside the found funds into a high interest account to use toward your next vacay! This is a great time of the year to create a 2023 spending plan that lists all your planned and unplanned spending. Consider using budget software or an app to get started.
While the holidays are a season of giving, it can certainly takes a toll on your finances. We hope these tips help you use the cash and gift cards you receive to keep yourself on track financially for a truly Happy New Year!