Budget smart now – enjoy great holidays later


Let me say for the record that I hate rushing the holiday season – the appearance of Santa Claus in the stores as soon as the Halloween decorations are cleared out, hearing Christmas carols before the first snow has fallen, that kind of thing.

So why am I writing about holiday shopping when temperatures are still pushing 80 degrees at  the end of September?

Well, I'm a great believer that people could better manage their finances if they did more planning ahead rather than simply reacting on the spur of the moment.

Since it is undeniable that holiday spending has a major impact on household finances (more on that in a moment), then it really isn't too early to do some planning on how to make more responsible holiday spending decisions this year.

Some hard facts about holiday spending

Why the urgency? Because the stakes are so high. According to the National Retail Federation, holiday season retail sales last year totaled $616.1 billion. When holiday sales are strong, it is generally reported as a sign of strength for the US economy. I would tend to agree if I thought people could actually afford what they are spending, but there is evidence to suggest that many cannot.

Figures from the Federal Reserve show that credit card debt outstanding jumped by more than $40 billion from September 30 to December 31 last year. A similar jump occurred in the year before that, when credit card debt outstanding increased by nearly $37 billion.

In fact, if you review the historical numbers, a troubling pattern emerges: During most of the year, Americans typically manage to pay down credit card debt, but they more than make up for it at the end of the year. As a result, credit card debt outstanding has been increasing over time.

Spend less, enjoy the holidays more

If January credit card bills tend to spoil your holiday afterglow, then consider these ways to spend less so you can enjoy the holidays more this year:

  1. Measure what you spent last year. One reason holiday spending gets out of hand is that people lose track of it in the heat of the moment. You spend a little more on this person, feel obligated to buy a gift for someone who has invited you to a holiday party, and over the course of November and December you systematically destroy your budget, one credit card swipe at a time. The starting point for getting control of all this is to face the facts by figuring out how much you spent last holiday season. Another key piece of information to review is how much your credit card balances increased by the end of the year — that is a measure of how big a problem you left yourself with.

  2. Think about whether or not you are happy with how you spent the money. Once you figure out how much you spent, review how you spent it. See whether there was a solid rhyme or reason to how much you spent on which people, or whether gifts for some were way out of proportion with the rest of your giving. Think about whether you shopped for the best deals on those gifts, or whether you felt rushed into buying at the first price you saw. Perhaps most importantly, think about if these were gifts that really met a need or brought joy to your friends and family, or whether they were things you chose because you couldn't think of what else to buy.

  3. Create a detailed budget for this year. At this point, after reviewing what you spent and how you spent it last year, you should have a better idea of what you did right and what you did wrong. Now it is time to act on that knowledge. Start by figuring out how much you can spend without leaving yourself with more credit card debt. Then make a list of recipients and figure out how much to spend on each, based on who has been naughty or nice or whatever other criteria are important to you. A detailed budget is important, because, if you try a more general approach, you will inevitably remember someone else after you have already spent as much as you had planned to spend in total.

  4. Early preparation lets you practice opportunistic shopping. Besides giving you time to do the planning described above, the real reason I wanted to write about this so early is that I am a great believer in opportunistic shopping — buying when you see a great price or a genuinely thoughtful gift, rather than the forced march through the mall that last-minute shopping represents.

  5. Retail competition means early sales promotions. Another reason to make your gift-giving plans early is that retailers are increasingly trying to out-maneuver one another by offering early price promotions to capture consumer dollars before they can be spent anywhere else. Consumers who are ready to buy early can take maximum advantage of this trend.

  6. Try making payments in reverse. How long did it take you to pay down your credit card balances after last holiday season? However long it took, think about making those payments in reverse this year — that is, over the same amount of time, start directing money into your savings account in advance of this holiday season. Granted, given the low level of today's savings account rates, you won't earn much on that money by saving up in advance, but you will save a lot by not paying double-digit interest rates on a credit card balance after the holiday.

  7. Time can be more valuable than money. An alternative to physical gift-giving is to arrange to spend time with friends and relatives. For an example, arrange a small holiday dinner party where each guest is responsible for a course rather than everyone exchanging gifts. This should be cheaper, and the camaraderie you'll share is more in the holiday spirit than traipsing through the mall trying to find a gift for everybody.

  8. Consider exchanging skills rather than gifts. Offer to cook someone dinner in exchange for baby-sitting services, or change someone's oil in exchange for getting your laundry done. It's cheaper, and each party will get something that's actually useful.

So really, even though I am committing the transgression of talking about the holidays well ahead of time, I haven't gone over to the dark side. You are about to be hit with a barrage of appeals to spend your money; I want you to be prepared to resist so that the new year can be as happy as the holiday season.

What do you do to stay within your holiday budget? How early do you start to plan?

More about...Budgeting, Giving

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Beth
Beth
4 years ago

“budget early” “shop sales” “give experiences instead of stuff”– the advice doesn’t change from year to year or from online publication to online publication. It’s easy to put together a listicle — but how do you actually make it work? I’d love to hear from other GRS readers. Some members of my family are very resistant to ideas like secret Santas or giving experiences instead of stuff — they want STUFF. It just isn’t Christmas without lots of stuff to unwrap. For me, it doesn’t feel like Christmas without the family members we’ve lost in recent years so I’ve admittedly… Read more »

lmoot
lmoot
4 years ago
Reply to  Beth

Nobody can force you to give them a gift. I’m a pretty selfish gift giver in that I like to choose a gift that I think they would like. I despise being given what is essentially an “errands” list to go buy them an exact item in the exact shade or style they requested(except for a child who doesn’t have the means to get it themselves). Every secret santa I’ve been a part of I request for my hint that they provide me their interests, not specific items or gift cards. Some people like giving gift cards, I don’t. One… Read more »

Richard Barrington
Richard Barrington
4 years ago
Reply to  lmoot

I think your story about everyone ending up exchanging gift cards says it all. There’s a place for them, but in many cases we could just as well take a $20 bill out of our respective wallets and exchange them – what’s the point?

I also like your description of certain kinds of holiday shopping as being assigned errands. Using your own initiative is not only more thoughtful, but it is usually makes shopping more enjoyable.

Another Beth
Another Beth
4 years ago
Reply to  Beth

I have kids, and while I am glad our extended family wants to spoil them, it’s overwhelming. They don’t even know what they get most of the time, and I end up selling quite a bit at my yard sale because the gifts end up unopened and forgotten. I have told my family over and over to cut back on presents, but they respond by buying EVEN MORE. I have decided I will only give about $25 per adult, and we have long ago limited our list. That’s a nice amount for some gourmet coffee, great chocolate or some other… Read more »

Kat
Kat
4 years ago
Reply to  Beth

My favorite tricks for holiday shopping are: 1. I looooove receiving gift cards. It’s like free money. I use gift cards from last year to buy this year’s presents. Since I know I’m not going to buy $50 worth of body lotion for myself, why not use the gift card to purchase small gifts for co-workers? Last year’s $20 gift card from my sister becomes a gift for Aunt Connie this year. I wish everyone would just give me gift cards. Then my holiday budget would be $0. 2. Take advantage of after-Christmas sales to buy gifts for next year.… Read more »

Brandy
Brandy
4 years ago
Reply to  Kat

Exactly I looove gift cards too. Its not cold, it what they represent. I can get basically a free meal, or books or some clothes I want.

My mom used to have all our gifts for Christmas bought by now. She could relax at Christmas.

Tina in NJ
Tina in NJ
4 years ago

When my MIL died just after the holidays, I found a picture of her and my FIL and the grand kids in front of the Christmas tree a few years earlier. I had several copies printed, framed them, and wrapped them up. When I had my daughter distribute them on Christmas Eve, she loudly whispered, “Is this the picture frame?” She got a lot of ribbing about spoiling the surprise. My kids never said anything, but their pictures are prominently displayed. All the kids in my family are older, so they get cash, but I like to make little bags… Read more »

My Factoring Network
My Factoring Network
4 years ago

Very smartly planned. Reduction of expenses during the normal days can fill our pockets with lots of savings. But we should not forget about the emergency fund. we should be creating it side by side. Thanks for sharing.

Emily @ JohnJaneDoe
Emily @ JohnJaneDoe
4 years ago

I think if you make the gifts more personal, you can get by with spending less. (at least with adults) I make personalized calendars for my inlaws and parents, with family pictures for the entire year. They look forward to it every year, and I get by much cheaper than if I went with giftcards or an individual present for each.
One year I knitted hats for each family member. It took a lot of time, but it went over really well, and I probably spent about $5 a hat.

Sophie
Sophie
4 years ago

@Beth, I too had a hard time convincing family to go the no gifts route. In the end, some of them were convinced by the really cool photos of the day trip my sister and I took instead of getting each other gifts and we took a much bigger group out the next year. For those who insist upon a gift, I spend $20 on a carefully chosen gift, no exceptions – it certainly takes a lot of thought, but it’s perfectly possible these days to get genuinely thoughtful gifts without spending a lot of money. Shop the craft markets,… Read more »

Lu Zirong
Lu Zirong
4 years ago

I like your plan, it’s Very smart. your ideas are very useful for me to save money. Reduction the expenses during the normal days can save a lot of money in our pockets. But we can not forget about the emergency fund. we should create it side by side. Thank you for sharing your ideas for us.

This is a good blog, it has catchy but concise title, opening paragraph, details, consider visuals and calls to action.

Harmony @ CreatingMyKaleidoscope
Harmony @ CreatingMyKaleidoscope
4 years ago

My plan is to make as many gifts as possible, starting NOW. This is my list of ideas: http://creatingmykaleidoscope.com/2015/09/14/over-25-cheap-easy-diy-christmas-gifts-for-everyone-on-your-list/

Richard Barrington
Richard Barrington
4 years ago

I’m not normally a crafts person, but you’ve got some cool ideas in there – makes me wish I was on your Christmas list!

paul
paul
4 years ago

We banned gifts for adults years ago – only the kids get gifts. The fun of opening gifts is preserved. They are generally easier to please, but I give the older ones cash. This way there is gift giving, and more time for the adults to eat and drink, and much less time wasted at the mall and lugging around stuff bought on amazon.

Lin
Lin
4 years ago

I agree that this advice is great, but somewhat difficult to apply in practice. I definitely agree with spending from a savings rather than a credit card. My personal trick is to print my own holiday cards (usually from a picture I’ve taken). I write a truly personalized message on each one. I can hand-deliver many of these and mail the rest. It takes a long time, and it isn’t free, but many of my co-workers still have them prominently displayed long after. And writing them, though it takes forever, is fun– a great antidote to the holiday blues is… Read more »

Richard Barrington
Richard Barrington
4 years ago
Reply to  Lin

The thought about taking time to write a truly personalized message really hits home. I think with e-cards and other conveniences, we’ve lost the personal touch in many cases. I’m sure your efforts are appreciated by the recipients.

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