Shopping-obsessed? You’re not alone

This is an article from my bank for the holidays! I think it's very sound advise and would like to share it with you!

"Shopping-obsessed? You’re not alone
Whether it’s new clothes, gourmet foods, or a big-screen TV, we all have our indulgences. With all these spending temptations, it’s a good idea to remind ourselves of some time-tested principles for getting ahead financially: saving for the longer term, using credit smartly, and being a savvy shopper.

Let the good times roll
Canadian consumers are enjoying some good times. More of us are working than ever before. Low interest rates have made it more affordable to buy a home. Our dollar is strong and inflation is low. In 2006, disposable income rose by 6.2%, which kept our confidence high and our spending robust.

Did you know? The retail sector is the second largest employer in Canada, representing about 11% of total employment — just behind manufacturing.

Indeed, in 2006 retail sales across Canada grew by 6.4% from a year earlier, to almost $400 billion. Put differently, each Canadian spent almost $12,000 last year. More than half of our retail spending went to vehicles, gas, and food and drink.

Furniture, electronics, health and personal care products, clothing and footwear, and lawn and garden products are other big spending categories.

Consumer tip: Don’t forget to cash in reward points. Most of us carry loyalty cards in our wallets and purses. Have you actually used any of the points you’ve been gathering? If you haven’t, you may lose out to “loyalty-card inflation” — where the number of points needed to buy an item increases over time.

Where’s the growth in spending?
The biggest growth in spending in 2006 occurred in hardware, lawn and garden products — soaring almost 10% higher than a year earlier. Canadians’ passion for home renovation helped keep these sales strong.

Spending on gas and oil grew by 8.8% in 2006, largely the result of price increases. Despite higher fuel costs, we also spent more on vehicles than we did last year.

Health and grooming are also taking up more of our budgets. Spending on health and personal care products rose 8.1% last year. Sales of prescription drugs (which represents more than half of the health and personal care category) increased 10.3% in 2006. Spending on beauty products (cosmetics, shaving cream, toilet paper) was up 5.2%.

Consumer tip: Stock up! We use things like soap and paper towels every day. And unlike the latest fashions, they never go out of style and have long shelf lives. Buying these items in bulk or larger sizes (or when they’re on sale) can save you money. If you live alone, consider splitting these purchases with friends or neighbours.

Be smart about your borrowing
If you shop with credit cards, as many of us do, make a point of paying off your balance in full and on time. This will help your credit rating and save you money on interest charges. Also, take advantage of your card’s grace period, which can be up to 26 days.

Limiting yourself to one or two cards will reduce the temptation to overdo it with credit. Choose cards that have benefits that you actually use, whether it’s free travel, free movies, or cash back on your purchases.

Online shopping tip. You can pretty well find anything you want online. More importantly, you can compare prices in a snap, and read a wealth of customer reviews on products, services, and merchants. So take the time to do your research before making big purchases.

A personal line of credit is a more cost-effective way to borrow for things like home renovations. If the line of credit is secured by your home, your borrowing costs may be even lower.

Did you know? Department store credit cards often carry the highest interest rate.

Stay focused on your goals

In a climate of rising spending it can be a challenge to keep your financial goals in mind. Here are a few suggestions.

Save more. Do whatever it takes to put aside more money: follow a budget, cut back on discretionary spending, clip coupons (in print and online).

Contribute to an RSP. For most Canadians, the best place to save is in a registered Retirement Savings Plan (RSP). It’s the best tax-saving vehicle available, and is also a powerful tool that can provide you with financial flexibility later in life.

Build a “rainy day” fund. Despite our best-laid plans, life can sometimes toss a curveball our way. An unexpected job loss, a transmission job, or home care for an elderly parent — any of these can throw our finances out of whack.

Rainy day funds are particularly important if you have dependants, or if your income fluctuates because you work on commission or are self-employed.

Consumer tip: Use your gift cards. A large number of gift cards are never redeemed (anywhere from 10% to 30%). If you receive gift cards this season (or have any from last year), make a point of using your cards before you forget about them. Some stores now allow you to use your cards when shopping online.

Pay yourself first. Whether you are contributing to an RSP or building a savings fund, pre-authorized contribution plans are the most convenient and disciplined way to save — and they won’t cost you a cent to set up.

The actual amount that you earmark for your different goals is not as important as setting aside money on a regular basis, and ensuring that you stay on course.

Your financial advisor can help evaluate your spending and saving habits and keep you on track to achieving your financial goals."

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