“Oh, for the good old days when people would stop Christmas shopping when they ran out of money.”
The holidays are a time for goodwill, meaningful celebrations, and time with the ones you love. They are not a time for financial planning and budgeting. Unfortunately, it’s also a time when some people go deeper into credit card debt, spend down their savings, or consume more than they intended. For some families, it’s a holiday tradition to spend the first months of the New Year “paying off” their Christmas purchases. Some think that this is the time to compare financial planning vs. Budgeting.
Between Black Friday/Cyber Monday and Christmas/Boxing Day, we’ll hear all about “saving” on an infinite number of purchases, from new coats to new cars, but little about saving for the future. Even the best financial intentions can get derailed or delayed during the holidays.
According to various polls and sources, Americans plan to spend between $750 and $854 this year for Christmas. However, a poll published online by the Finger Lakes Times shows that median spending does not necessary reflect the average. While a large number of respondents (37.4%) planning to spend “less than $250,” a sizable 10.6% on the other end of the spectrum planning to spend “over $2,000.”
And these figures only represent planned Christmas spending. What about holiday dinners, entertainment, treats and decorations… or unplanned spending that happens at malls? (Who hasn’t come home with a present or two for themselves?)
Fortunately, it doesn’t have to be this way. Here are some tips for surviving the holidays without sabotaging your savings:
1. Plan your Christmas budget and stick to it. Make a holiday spending plan, and follow it. Know what you can afford, and avoid impulse shopping. Make a list of names and either pre-select gifts or shop with a firm budget in mind.
2. Research prices. Compare your local discount club (such as Coscto) with other store specials, coupons, and amazon.com. And although we doubt anything is worth getting up at 3am to be trampled by strangers, there are fabulous Black Friday and boxing day specials. Many of the specials are available online – no trampling required!
A tongue-in-cheek reminder: Make sure you actually save the money, instead of just buying more! Honestly, does it make sense when someone says “I saved $600 on this computer – I got it for $2,000.” But if the “saved” $600 doesn’t show up as a new deposit into an accumulation account, you didn’t save it – you just spent $2,000!
3. Don’t use credit. When you shop with credit cards instead of cash, it doesn’t feel like you’re spending “real money.” Studies show that most people are less likely to make purchases, and more likely to spend less when they do, when they pay with cash as opposed to credit cards.
As former About.com Financial Planning guide Deborah Fowles explained in an article on “The Psychology of Spending Money,” “The pleasant feelings you experience when you purchase the item are disconnected from the unpleasant or painful feelings of making the payment when you get the credit card statement.” Shop with only cash, checks, or debit cards. Leave the credit cards at home.
4. Get creative with your gift giving. People love thoughtful gifts, especially if they are homemade. Instead of giving someone a $100 gift, be creative and find a way to give them a nice $25 gift instead. Consider giving something that you wrote, knitted, recorded, baked or painted. Involve your children in projects, make gift-giving a family project instead of a consumer activity.
5. Communicate with friends and family. While too much communication may ruin the “surprise factor” for children, many adults can lower the stress of the holidays by simply communicating wishes and expectations openly with other adults ahead of time.
Suggest cutting down on expenses in extended families by choosing names from a hat, or having a gift exchange where everybody only brings one gift. That way you only have to buy a gift for one member of the extended family, instead of ten or twenty!
Avoid spending more than you feel you should on a gift for a relative or friend (who earns twice what you do), anticipating they will buy you something nice (again) and not wanting to feel your gift doesn’t measure up. Instead, open up a dialogue about setting dollar limits or even gift alternatives, as in our next example. More often than not, you’ll find others happy to spend less.
6. Spend Time rather than Money. Ask your friends if you can exchange gift-giving for an experience instead. Say something like,
“Would you be willing to try something new this Christmas? It’s easy for me to go over-budget and have spender’s remorse, when all I really want to do is show the people I love that they are important to me. So I propose that we go shopping together, not for gifts, but for ingredients to a fabulous holiday dinner that we can cook and enjoy together. The truth is, I’d rather spend the holidays celebrating with the people I love than shopping for the people I love.”
Propose a potluck, Christmas caroling, or a cookie decorating party. Spend the holidays creating memories rather than consuming.
7. Give gifts that count. You know how hard it is to shop for people who already have everything they need? Consider giving to a charity in their name, adopting a family, or “thinking outside the gift-wrapped box” by making a purchase through Heifer, International.
You might also have people on your list who could use the gift of financial education. Consider purchasing the new book from The Prosperity Economic Movement, Busting the Retirement Lies.
8. Lastly, practice healthy savings habits year-round. Practicing sound financial practices every season, such as:
- “Paying yourself first,” perhaps through payroll deductions or automatic deposits to accumulation accounts.
- Living below your means, always earning more than you spend.
- Structuring insurance in a way that maximizes cash flow and saving.
- Establishing a healthy emergency fund that is easily accessible – not in a qualified retirement account or home equity loan.
Prioritize what can’t be delegated. With many aspects financial management, you rely on accountants, tax preparers, insurance agents, financial advisors, perhaps estate planners or business attorneys, etc. Ideally, their experience and savvy move you further toward your financial objectives. However, SAVING is the one thing that nobody can do for you!
If you can master the art and discipline of saving year-round the opportunities for wealth-building are limitless. Making a habit of saving ensures long-term wealth accumulation, and allows you to give your family the gift of financial stability every year.
We’re here to help you New Year be your best yet. Would you like assistance in establishing the habits that lead to prosperity? Are you looking for savings vehicles insulated against the instabilities of the stock or housing markets? Contact us – we’d love to show you a different path.For more information on alternate financial strategies, read our Ultimate Guide to Financial Planning Myths.