When you enter a shopping mall during the holiday season, are you hit with a rush of excitement and happiness, or are you bombarded with that all too familiar sense of anxiety? Do the holiday candles make you swoon or sick? Take my family as an example. My sister and I love to shop and would happily spend our free time at the mall or scrolling through online Black Friday sales. However, our mother avoids shopping malls at all costs and is far too overwhelmed to sift through the plethora of inventory online. And our father, while he loves all the options out there, has a lot of difficulty deciding on which brand or color to get because, of course, he doesn’t like what we put on our wish list. Therefore, my sister and I are the designated family gift shoppers, and we simply just ask for mom’s credit card when it’s time to get her a gift for dad and vice versa. I set the budget, and my sister and I are off to the races.
No matter which category you fit into or which holiday you celebrate, this time of year prompts us to spend. It’s not just the gifts, of course. There’s still the holiday dinner that you may host, the holiday decor, the dozens of baked goods, the extra movie night or Nutcracker performance, that holiday party you attend every year, or even the one or two secret Santas you may be involved with. While the only item on that list has somewhat of a budget (Secret Santa – though you always know there’s one person who doesn’t listen), it leaves us to wonder – how much should we spend? Well, there’s no set formula, but I will say this: set limits before you go or scroll. Easier said than done, right? Well, here are a few tips to keep yourself and your family in check when going down that never-ending wish list or elaborate holiday dinner menu:
- Assess your current situation.
- Take a look at how much money you have in the bank. Does this make you comfortable? Do you have enough in your emergency reserve? Ideally, this should be 3-6 months of expenses, but talk to your advisor about how much is right for you.
- If you have a holiday fund, did you save as much as you thought?
- Stick to the plan.
- Review your financial goals for the year ahead.
- Create your goals if you haven’t thought about them. For example, do you have home repairs coming up, a fun trip, or big car maintenance, etc.?
- Be mindful of debt.
- Will your holiday spending prompt you to stack up your credit card bill? Or if you spend money you have now, will you risk going into debt because you don’t have enough to cover an emergency car bill or roof repair?
- Create your own list.
- Write down all the people you want to give a gift to. If you tip your doorman, mailman, cleaning crew, etc., be sure to include them too.
- Next to each person’s name, jot down how much you plan on spending on them. This action helps when trying to be equitable with your kids or other family members/friends.
- Write down all the events or gift exchanges you plan on participating in and how much each event will cost. Include any charitable donations as well.
- Add it all up and assess how it makes you feel. Adjust as needed for this year and use it as a reference point to save more for the next holiday season.
- Be mindful of “it’s a good deal” and impulse purchases.
- Just because something is on sale doesn’t mean it is necessarily a good deal. Do your homework before you get swept up in the sales.
- Ask for wish lists early so you can look up the prices of the gifts they want. Now you have a baseline for what everything costs.
- Keep the big-ticket items on your radar and search for them when pre–Black Friday sales start.
- Don’t spend money you don’t have yet.
- You may receive a bonus at the end of the year. Perhaps you receive one every year or maybe it’s inconsistent. Regardless, don’t spend your bonus until you receive it. It could cause unnecessary stress if you don’t have the funds yet, and it could harm your financial plan if you don’t receive the bonus.
- Ideally, you should feel happy upon receipt of the bonus funds rather than relieved.
- If you receive a bonus, still try to stick to your original budget and avoid getting carried away with holiday spending. Refer to your goals and see how the extra funds could help.
While all of this may seem straightforward, it’s much easier to write about it than it is in practice. While you may not be able to follow everything I spoke about, that’s okay. Do your best, and you will get better each year. Contact your advisor if you would like extra savings tips or if you want to review your goals.
We wish you and your families a wonderful holiday season!