Holiday Humbug or Holiday Spendthrift - finding balance in your budget this season

Tips to Avoid the Pitfalls of Holiday Spending, from Questis Coach Kimberly Esse

If you’ve been to any craft stores lately (I have!) you know that Holiday décor has been out in full display for weeks now.?

While constant seller anticipation of the next holiday has come earlier and earlier (Starbucks started selling pumpkin spice lattes in August) it has become common and normalized. Why? Because it is effective. Consumers are starting the next season’s shopping sooner and sooner each year. According to a?Bankrate survey, “48% of holiday shoppers plan to start shopping before Halloween.?This includes 12% who plan to start by August 31, 13% in September, 24% in October, 37% in November, and 15% in December.” This means there is longer to shop for a holiday, and we are likely to spend more than we intend. We forget previous purchases or simply are not tracking what we are spending as closely. And who can blame us? When the holiday shopping season is perpetual, how can you keep track, anyway?

Sellers are successfully playing on our nostalgia and taking advantage of the ease of buying any time of day and receiving it overnight. The simplicity of buying and receiving is tempting and convenient. Can you think of the last span of time when a holiday or season was not being marketed to you in a way that had you longing for something you had not considered you needed? New winter boots, for example? A fully loaded coffee beverage, or a new kitchen tool? If it’s not one season, it’s another- and all cycles are meant to draw in your expendable dollars.?

As a financial coach, I see that fewer people have those expendable dollars. But increased marketing is causing more FOMO (Fear of missing out) than ever, and it is driving spending out of fear or anxiety rather than out of true joy, pleasure, or value. The result is that people are either feeling deprived or indulged and feeling guilty about it later. And the quality of goods purchased does not necessarily reflect the cost.?

Having a plan for your money, and your time, this Holiday Season (and all holiday seasons) can help you purchase things you truly value, which fit into your spending plan. I recommend a few tips to my clients in an effort to relieve the FOMO and to spend where it really counts:

1. Assess your gifting needs. Identify who you are buying for, and what they value or enjoy. Could it be something you make? An experience you do together? What about a nice dinner or concert? Does this person need a gift? Do you feel good about spending money on this person??

1. Identify the stores you will shop at and commit to a dollar amount (total or per person). I am guilty of this- I let the holiday spirit take me away and end up at stores I did not anticipate going to, spending money I did not plan to spend. Be honest about what amount of money you can afford and think of shopping like your grocery list. Creating a list in advance helps avoid shopping for impulse buys you weren’t planning, and it allows you to save time and money navigating the holiday shopping landscape. If you are going to allow some play money for yourself to go off course with, commit to that amount in advance. Your credit card and checking account statements will thank you.?

1. Think about the feeling you have when you consider making a holiday purchase. Identify it. The feeling may be different depending on the person you’re shopping for, when and how you’re shopping, and what it is you’re shopping for. It may be impacted by cost, too. Consider all the factors that are going into that feeling. Is it related to making the purchase, or the actual good or service you will be buying? Do you love shopping on Black Friday because it is tradition and you feel festive, but then feel guilty later after you look at your credit card statement? How could you still engage in the tradition you love, without guilt later? How could you change one (or all_ of the factors to make the experience something high value for you??

1. Identify what is driving you to make a purchase. Is it fear, anxiety, or obligation? FOMO or keeping up with your friends? Or is it joy, love, necessity, or value? Consider the feeling you had before the purchase, and how you feel (or might feel) afterward. Consider what feeling you might have about it in a few months, or even a year. Will you remember buying it? Will your recipient remember it? Be real about your emotions when it comes to making a purchase. Our feelings around purchases help us identify our values, and if we listen to them, we can make buying decisions that resonate with us in the future.?

1. Remember that sellers want to make money, and they hire professionals who are incredibly good at selling. There are many tricks used by sellers, like creating popularity via large volume of ratings, or being a “top seller.” You may save more by buying more, receive initial discounts with auto-renew or a free trial, or it may be hard to cancel or make changes to your cart. Marketing can create a sense of urgency by telling you there is only a few remaining in stock, x amount of people purchased it in the last 24 hours, or it is currently “in people’s cart.” Something overpriced might be on “sale,” or a seller may entice you by offering Buy Now Pay Later options that make something seem cheaper than it is.?

Think of spending more meaningfully and in alignment with what you value. This will help you put your valuable money where you most value it, but also away from companies that engage in predatory marketing, create subpar products, and are even ethically questionable (according to your own values and beliefs, which are subjective and up to you to choose).?

1. Get real with your spending plan! Don’t have one? A financial coach can help! You may know a spending plan as its more common name: A Budget. I do not like the term “budget” because it implies rigidity and inflexibility. Creating a plan to spend is like creating any other plan- We do our best while planning for the unexpected. With a spending plan, we can amend it, adjust it, and change it according to our needs and wants. It is sustainable, and it gets adjusted every month or quarter. We visit and revisit it to ensure it is working for us and our goals. And when our situation changes, it does too. Budgets are like diets- no one likes them, and we can rarely stick to them. They are not sustainable life changes. But spending plans are- you are in control of your plans.?

How to start a spending plan for the holidays

You could save for holiday or seasonal shopping each month, as a “line item” in your spending plan equal to the full amount you spend for holiday shopping each year. You can look at your previous shopping expenses for gifts for the year (including other holidays and birthdays), then divided it by twelve to get to an estimate of a monthly cost. You would not spend this amount each month; you would instead put that amount away in a separate savings or checking account (different from your day-to-day checking account) and save it for when you do make a gift or holiday purchase. The money would be there for you at any time. This helps you save all year and is there for you when you need it.?

Another popular option is to set aside the money for holidays 1-2 times a year, and simply put less towards other expenses or savings goals during those periods. This means you know you will spend or save less those months and account for that in your goals.?

Feel Empowered this Holiday Season

The key is not to be caught off guard by a credit card bill over multiple months of holiday spending. Instead, empower yourself with a spending plan that lets you spend on the holidays. Knowing you have a finite amount of money helps you be more strategic about purchases and lean into what is important to you, and what is not. You also can enjoy the holiday season unscathed because you had a plan for your money. It keeps you mindful AND wealthy (or, closer to it!)?