By David Henderson, CFP, ChFC, CLU
The holiday season can be a great time of year filled with rewarding time spent with family and friends, but for many unfortunately, it can also be a very stressful time of year in relation to your finances. One way to reduce some of that stress is to avoid spending too much. Here are a few holiday spending tips that can help you make some deliberate choices about where you spend your money.
Get an early start to your planning
As with many financial planning subjects, a great place to start is by setting a budget. Make a list of everyone that you plan to buy gifts for and roughly how much you plan to spend on each person. As families get larger with more nieces, nephews and grandchildren figuring out who you are going to buy gifts for can be a tricky proposition. In this day and age of blended families there can be even another layer of complication added. That is why I recommend setting aside some time before the emotions of the holidays set in to make some wise choices. Don’t forget, gifts are only one item in the budget. If you will be traveling there are a number of additional expenses that come along with that as well. Things like eating out more often and pet boarding are two examples of expenses that are often overlooked.
Use credit cards wisely
If you’re a person who is disciplined enough to pay off your credit cards each month then by all means charge your holiday expenses. That way you can take advantage of any extra benefits your credit card offers. Perks like airline miles and cashback can be a welcomed benefit for a responsible credit card user. But, if there is even a remote possibility that you would not pay off the credit card in full as soon as the bill comes in January do not charge your holiday expenses (or anything else)! The interest expense from even a month or two of carrying a balance may outweigh the benefits of any type of rewards. You don’t want to still be paying for your holiday spending when the days start getting longer and the flowers are in bloom next spring.
Save your receipts
Saving your receipts is sometimes overlooked as a potential way to save money. Some retailers will allow you to come back and get a refund of the price difference if an item you purchased goes on sale for a lower price within a certain timeframe. Keep an eye on any large ticket purchases to see if this situation happens to apply to you. Having your receipt also makes returning unwanted or damaged items easier if you prefer to get cash back instead of in-store credit.
Instead of thinking that you have to buy everyone on your list a gift think about potentially making something others would enjoy. I personally love to receive home-baked items. Even though my wife does an excellent job baking many of my favorites each year. I love to sample other people’s special recipes. You may also be good at arts and crafts and could make some wonderful gifts that people would truly treasure. If you think back about the gifts over your lifetime that have made the biggest impression many times they will be small, thoughtful and handmade.
Plan ahead for next year
One of the best ways to reduce financial stress is to plan ahead for whatever occasion you’re saving for. The holidays are no exception to this. If you set a budget right now for next year and put away 1/12 of that amount each month you may find as the season approaches next year your stress level over finances is greatly reduced. It may sound crazy to think about buying any gifts or decorations in January but sometimes you can find great deals in the after holiday sales.
With a little bit of planning and discipline you will be able to get through the season without worrying about what kind of a financial hole you’re putting yourself in. You may even find that you’re able to enjoy the festivities more with the knowledge that you have created a financial plan for your spending and stuck to it.
Securities and Advisory Services Offered Through Client One Securities, LLC Member FINRA/SIPC and an Investment Advisor.