By: Chris Fuksman, CFP®
As the year-end holidays come into full swing, it is essential to remember to be mindful about holiday spending. With the savings and deals that pop up now and throughout the year, it is easy to get carried away. However, one must consider that impulsive spending may lead to post-purchase regrets. For many, the year-end holidays can also bring about additional financial stress and worries. With that, there are many things one can do to avoid overspending and maintain flexibility this holiday season to keep their financial and emotional well-being in check.
1. Create a Budget – and stick to it
The first and arguably most important step is to create a realistic spending limit for yourself this holiday season. One could further break this down by allocating amounts to specific individuals, organizations, or charities they’d like to gift to. One often overlooked holiday cost also comes in the form of decorations, so be sure to include these in your total budget. While this strategy is effective, one must be disciplined and stick to their budget. Prioritizing what is important to you and remembering your long-term financial plan can help keep you on track. Once your budget is in place, you should also consider avoiding Debt, which can undermine your budgeting efforts.
2. Avoid Debt
With the availability of credit cards and pay-over-time features offered by many retailers and companies today, it is critical to be mindful when considering these options. Opening a new credit line for a special offer or buying an expensive item using a pay-over-time structure can also be enticing. However, being wary of putting yourself in Debt is essential – especially in today’s current interest rate environment. While managing these emotional purchase impulses may be challenging, there are ways to plan and be proactive about your spending.
3. Shop Smart
Many remember what Black Friday was like, with consumers shuffling into stores before sunrise to act on blockbuster savings and deals unseen at any other point of the year. With the increased ease of online shopping today, Cyber Monday has also become very popular. However, one must remember not to overdo it on these special days. Just because something is on sale does not mean you need to buy it. At the same time, keeping track of items you want throughout the year can be beneficial. Researching deals and taking advantage of discounts as they arise can help you make smarter purchasing decisions. For example, it may be possible that a potential gift could be at its best price in July.
4. Different Types of Gifting
Gifting does not always have to involve store-bought items. While it may not seem as exciting, other forms of gifting can leave lasting memories. In addition, many people overlook other forms of gifting, which can sometimes be available without breaking the bank. For example, one may consider volunteering with their favorite charity or organization – time is a valuable gift to give! In addition, you may consider a low-cost event, activity, or even a homemade craft as opposed to an expensive gift. Examples like these provide flexibility and could even create more sentimental value. With that said, you shouldn’t limit yourself to expensive, store-bought material gifts.
While we always recommend being mindful about spending throughout the year, we believe it is imperative to be attentive to impulsive spending come the end of the year. By proactively planning and budgeting, you can avoid the headaches later on.
As the holidays eventually close, we encourage you to keep tabs on your budget versus what you spent. Evaluating what may have gone wrong is worthwhile, allowing you to adjust your habits. This reflection can also help you become prepared with an action plan on how to start the new year off right confidently.
Happy Holidays!