Financial independence requires a long game plan. Saving and investing are part of the process. Yet so many things can divert our attention. A medical bill, auto or home maintenance, and the biggest one of all, holiday spending.
Of course, the holidays, centered around Christmas for many people, is not the only holiday. Retailers have figured out they can get more of your paycheck by having a holiday per month. All they need to do convince you each holiday requires spending. New Year’s, Valentine’s Day, St. Patrick’s Day, Easter, Mother’s Day, Father’s Day, Independence Day, you get August off for the family vacation, Labor Day, Halloween, Thanksgiving, and Christmas. I did focus on holidays here in America. Bet there is something similar where you live, if outside the U.S.
Spending money does not make a holiday better, regardless what retailers tell you. Holidays are about family and friends, time together. Some spending can enhance the holiday experience so the grinch can be stowed away.
As important as holidays are, you should not sacrifice your future for a single event. Holidays gifts are fine. Green beer on St. Patty’s Day is also fine, within reason.
The goal is to enjoy your holidays with people you love and care about while remaining true to your financial goals. Below we will discuss 10 tips to help you control your holiday spending.
1.) Keep a Budget
This one gets a lot of press. Yet it is so important that I will repeat it here.
Keeping a budget is more difficult than it seems. Holiday spending can creep up without you knowing it until serious damage to the wallet has been done.
The first step is to set an amount. Your facts and circumstances rule. It is unfair for an accountant from the backwoods on Nowhere, Wisconsin to tell you what you should and should not spend for any particular holiday. What I will encourage is setting a limit that allows you to remain true to your automatic investing. Retirement plans still need funding. Many reader consider tithing a priority. Don’t overspend to the point where you break your priorities.
If you currently have debt you will want to remain true to your debt elimination plan.
Priorities do not change just because the calendar says there is a holiday this month. Living within your means is the best way to prevent later regrets.
2.) Use a Separate Bank Account
If you struggle with staying within a budget, consider opening a separate bank account for holiday spending only. You can use a debit card connected to this account for holiday spending. When the money is gone, it is gone.
Seeing the account in real time is the best way to make quality decisions with current information. How much do you spend on the kids for Christmas? How much on a significant other? What about decorations around the house? How much should we spend this year on Halloween or Thanksgiving?
Rather than have a new bank account for each holiday, handle holiday spending as a line item in your budget. You know Christmas is coming up. Thanksgiving has a cost if you are feeding extended family. Easter has some expense. Independence Day. And so on.
Christmas is the holiday where spending is most challenged. A good way to handle this is to plan out holiday spending for the entire year. Divide by 12 and set that money aside for future holiday spending. Then transfer money from that account to the actual holiday spending account with the debit card attached.
The account balance will be highest as you approach the end of the year, as most holidays have less spending demands than Christmas. However, you know Christmas shopping will solve any excess money problems you have.
My point is that you need to find a system that works for you. The best system is one that keeps you within budget and that you stick to.
3.) Don’t Give a Gift
Early in my marriage, Mrs. Accountant and I decided not to give each other a gift for Christmas, or any other holiday for that matter.
You might be wondering why I am still married after 36 years with such a suggestion. The truth is Mrs. Accountant and I both didn’t want more stuff. We wanted to be together and stuff just got in the way.
That doesn’t mean we live like it is the Dark Ages. I’m not a barbarian! Rather, Mrs. Accountant and I agreed to buy something “we” wanted as it was wanted. For example, if the car broke down and it was time to upgrade, we would say the new car was “our” Christmas present.
My household doesn’t buy many vehicles, but we do buy “stuff” periodically. The best gifts for “us” are the ones that build memories instead of the landfill. Often we call a vacation our Christmas gift. And why not? We both enjoy it and neither feels guilt we spent on something we didn’t really want.
Be creative with this. Holidays are not about making a haul. Find what works for you. Some people prefer something tangible. I would be lying if I said I never bought Mrs. Accountant flowers. She doesn’t get them on Valentine’s Day (usually). They are a surprise (when unexpected) and therefore heighten the pleasure.
Shortly after we started the no-gift policy my brother and I decided to not give Christmas gifts to each other either. Yes, we spend time together during holidays, but neither of us need to pretend we are excited about things we didn’t really want. And no wasted time trying to find something to give either!
Parents were a more difficult sell. We cut the gifts here to token amounts. Before long everyone realized it was our time together that was the greatest gift.
I saved the kids for last. Kids might be a tough sell, especially when they are younger.
We generally give some kind of gift to the kids. Now that they are adults it generally works the way it does between Sue and me. Almost always, gifts now are around things that create memories. Stuff breaks. Memories built together last a lifetime.
Don’t read this and think you should cut the kids off for Christmas. Young children will be confused if they don’t get a gift when everyone else at school does. Moving to a less material holiday takes time. Discuss this with your children. They might be more receptive than you think. Or, it may take time to work in that direction. And for some it may not work. Apply this tip where you can and stay within budget for the rest.
4.) Rewards
Whenever I have a large expense I get a new credit card with an outsized bonus reward. This can shave serious money off the holiday spending budget.
Don’t forget other cashback rewards also add up.
5.) Buy When the Price is Right
People tend to buy holiday gifts near the holiday in question. However, most items are cheaper at different times of the year. Buying when the price is right is a powerful way to control holiday spending. Couple this with Tip #2 for better financial controls. By funding holiday spending monthly, you can buy gifts when they are on sale rather than when the holiday is on your doorstep, where you will likely spend more than if you had time to get the best deal.
6.) Comparison Shop
Comparison shopping is easier than ever. A good place to start is Amazon. This gives you an idea of what the item generally costs, along with similar items.
Depending on the item desired, you can now check other retails. Don’t forget specialty stores. As an example, when I buy office supplies for my tax practice, Amazon often is cheaper. Except for copy paper! Walmart has been a better deal for the exact same paper for years. Of course that can change. And if it does I buy my paper where it is lowest in cost. It is a commodity item.
One caveat. When comparing costs also keep quality in mind. The cheapest product or a low quality knockoff is not a good alternative.
7.) Shopping Portals
I’m not talking about the portal itself.
There are discount services that automatically apply savings if you belong to the service. Credit card companies often do this. For example, Capital One has a no-cost service that automatically applies discounts as you shop. If you have a Capital One credit card be sure you download their tool, called Capital One Shopping, to your browser.
Other credit cards have similar programs, too. Make sure you use these tools to keep your costs low without any extra effort on your part.
8.) Coupon Codes
Coupon codes are a great deal, but a pain in the tail side to find and apply. Services like Honey search for coupon codes when you shop. The savings can be significant! Best of all, they are generally a browser extension. A few minutes to set up and you are good to go.
9.) Discount Gift Cards
If you are unfamiliar with discount gift cards, you are missing the easiest way to save money.
The discount varies by retailer. Walmart usually has a low discount of ~2.5%, while Domino’s Pizza often has double digit discounts. Cardcash is an example of one of the services selling the discount gift cards.
If you are worried about losing your credit cards rewards, remember you will pay for these discount gift cards with your credit card (or debit card, if you wish). Kind of a double dip.
Not only are discount gift cards great for holiday spending, you can also save big when traveling. Just so you know.
Oh! And one more thing. If you get a gift card as a gift and don’t shop at that store, you can sell your unused gift cards, too.
10.) The Best Gift of All
It is to easy to get caught up in the blaring messages from retailers after your money. Turn off all media for quality time with family and friends. That is where your priorities are.
My family takes a few days each mid-December to drive around to see Christmas lights. The cost is a bit a fuel.
The best spending during the holidays is time spent with people that matter most to you. Nothing beats the feeling of love: received or given.
Holiday spending plays a role in our holiday rituals. Just don’t let that single ritual control your life or destroy other dreams.