Start your new year right. Skip the nagging holiday hangover.
No, not the kind brought on by too much eggnog or champagne—the financial hangover you face when holiday spending has tipped your budget into the red. Americans who took on holiday debt in 2018 overspent an average of $1,230, up more than $200 since 2016.
It does not have to be this way. With a little planning, you can create a spending strategy that allows you to celebrate the season without paying the price for months to come. But first, a few sobering statistics to demonstrate why financial planning is worth the effort:
- More than a quarter of Americans plan—yes, plan—to go into debt this season, according to a recent survey. Of those shoppers, 42% anticipate racking up at least $500 in debt.
- Many people will also add shame to their financial burden. One in 10 Americans intends to take out a loan to finance holiday spending, and 90% say they will hide this fact from family and friends.
- Financial hangovers are notorious for causing headaches long after the last holiday toast. In September 2019, 22% of survey respondents were still paying off their 2018 holiday debt.
Celebrate Now Without Paying Later
Debt is not a prerequisite for happy holidays, even if you love to celebrate in a big way. You can be merry and money-savvy if you make holiday spending part of your financial plan. Here are a few strategies you can implement right away:
- Shop with a plan. Do not hope for inspiration to hit as you wander through store aisles. Set a spending limit, research ahead of time where to find the best deals—whether online or in-store—and stick to your gift list.
- Activate Secret Santa and/or group gifts. These tactics allow you to shop for a few thoughtful items within your price range and save cash, time, gas, and aggravation. If you want to make a big splash with a particular recipient, can you chip in with friends or relatives to buy one high-impact gift from the whole group?
- Think less stuff and more cheer. If you are a talented baker, cook, artist, craftsperson, calligrapher, etc., consider handmade gifts. A beautiful, personal keepsake or treat is a heart-to-heart gesture. Does modern life get in the way of quality time with friends and family? Schedule a gathering in a restaurant or organize a potluck celebration and give each other the gift of time and attention this year. Take your favorite kids to a low-cost or free holiday gala.
- Control the damage. If you insist on spending more than the cash you have on hand, find the tool with the lowest interest rate. Options include:
- Use a low-interest credit card or a new card with a 0% introductory rate.
- Take out a revolving credit or fixed loan with a lower interest rate than your credit cards.
- Roll all debt from your high-interest credit card(s) onto one with a lower rate.
- Get a side hustle. Companies that cater to holiday merriment often need extra help at the same time you need extra cash. If you draw an hourly wage at your main job, are their opportunities to work some overtime?
Save Your Green Without Being a Grinch
The #1 best strategy is to make holiday spending a permanent part of a long-term holistic financial plan. Start now for next year:
- Determine where year-end holidays fit in your definition of a happy life. Do you look forward to them all year? What about the season delights you? The decorations, the gatherings with loved ones, the parties, and special holiday entertainment? If you like to razzle-dazzle, is it worth taking a more modest vacation or waiting longer to buy a house? A financial advisor can help you determine where holiday spending falls on your list of priorities.
- Track your gift-spending patterns this year to create a budget for next. Are you OK with the people you gifted and the amount you spent or is some trimming in order? Do not forget to track spending on food, entertainment, travel, and year-end charitable giving.
- Set your spending for next year and start saving. Calculate how much you need to save per month to reach your goal. Plan to save enough by summer’s end to cover holiday travel so you can get the best pricing on hotels and airfare. Consider automatic withdrawals from your checking account to avoid the temptation of spending holiday money on a spring shopping spree.
- Shop throughout the year. Take advantage of sales whenever they pop up.
- Give yourself the gift of peace of mind. When spending temptations threaten to derail your holiday strategy, remember that zero debt gives you the financial freedom to focus on what you want most out of life.
Reach out to FJY’s financial advisors to help create a plan for enjoying the best of the season as part of your year-round goals.