Can you believe the holidays are just around the corner? While they can certainly bring a lot of joy, they can also bring a lot of stress, particularly to our financial lives. A few weeks ago, Emilie Aries from BossedUp interviewed me for her blog on just this topic! Below I’ll share a few tidbits from the article, but I invite you to follow this link to read the whole article.
For years, my husband and I got caught up in the whirlwind of the holidays without thinking twice about our finances … until the bills arrived. We busted our budget every December and ended up paying for it (financially and emotionally) in January and February. I confess, we often ended up borrowing (read: stealing) from our savings to cover the difference. Eeek!
About two years ago we decided to make a change: We started budgeting for gifts all throughout the year. As we set our yearly budget, we include an amount for how much we plan to spend on gifts. Our list includes Christmas, family birthdays, our birthdays, Mother’s Day, Father’s Day, and our wedding anniversary, as well as other occasions we know about at that time where we might need to buy gifts like a friend’s wedding or baby shower. Then, we add up the total and divide it up over twelve months to start saving. We make sure to stash this money away in a separate savings account so we aren’t tempted to dip into it for anything else. Any leftover money is saved in our “gifts fund” for the next year.
Want this year’s gift-giving to feel better from start to finish? Here are a few steps to help you make the most of the holidays without breaking the bank:
1. Consider your cash flow: Aren’t as prepared as you like? Don’t get yourself down. So many people are in this boat with you! You’ve still got a month or so until the holidays are in full swing. Now is the right time to consider how much money you can afford to spend on gifts.
Tip: Take a look at your cash flow. Is there any money you could stash away toward gifts? Any ways you could cut down on expenses in November and December to give your budget some breathing room to accommodate holiday shopping? Determine what amount you actually can afford to spend. Then, stash any money you can in a savings account earmarked for holiday spending.
2. Think of your gifts as an investment in your relationships. I’ve seen many people spend money on gifts that weren’t really appreciated, whether that was for co-workers, friends, or even a family member. Who do you want to invest in this holiday season? Similarly, who might appreciate the gift of your time or your talents even more than a monetary gift?
Tip: Make a list of those you intend to give gifts to and divide your allocated money between them. Remember: you don’t have to spend the same amount on everyone. Consider the person: What would they most appreciate? Will the money spent on a tangible gift just go to waste? If you can, set boundaries and expectations among family and friends so there aren’t any surprises. There’s nothing worse than going into debt for gifts that may go unappreciated.
3. Look for creative gift ideas before you jump to buying something. Last year, I gifted every person on my team at work with a personalized note of gratitude. I told them what I appreciated about them and highlighted their strengths. Each card took me about 15 minutes to write and they were probably some of the most meaningful gifts I have ever given. Even today — almost a year later — some of my coworkers still have their cards on their desks. It only cost me my time and about $7 for the stack of 12 cards.
Tip: Creative gift ideas abound, whether it’s creating an art piece, knitting a scarf, donating to a charity in the person’s name, helping a friend organize their closet, offering a few hours of yard work, or making a couple a special date night meal. I encourage you to look for creative ideas before buying something. Make the person, not the gift, the primary focus.
4. Avoid credit card debt. I’m not a big fan of going into debt for the holidays, particularly credit card debt. Depending on your card, this debt could cost you upwards of 18% or even more in interest. It just isn’t worth it. That’s why it’s important to begin with your budget and start saving early.
Tip: That being said, I know sometimes using your credit card is unavoidable. If you do anticipate going into debt and you’ve done your best to follow the tips above, I would suggest borrowing from yourself — not your credit card company — first. Before my gift fund, I borrowed from my emergency fund. I wouldn’t use this strategy unless your only other alternative is credit card debt — borrowing from your savings isn’t a good habit to get into, but at least it’s interest free. After you pay yourself back, begin setting aside money for the next year’s gift fund. If you can afford to pay yourself back, then you can afford to start a gift fund for next year, even if you have to start small. If you must go into credit card debt, be cognizant of the interest rate on your card. If you have more than one card, charge your purchases on the card with the lowest interest rate.
5. Use credit cards wisely. If you are nervous about going into debt, I wouldn’t use a credit card for this spending. However, if you can use this resource responsibly, it can be a great tool. My husband and I almost exclusively use our credit cards for holiday shopping for a few reasons: First, we know we can pay back the amounts we are charging on our cards. Second, credit cards tend to be more secure. Third, we enjoy racking up points and taking advantage of perks.
Tip: If you plan to shop with credit and have more than one card, make sure you are using the card that is going to get you the most bang for your buck on that purchase. For instance, we will likely use my husband’s Amazon credit card the most because many of the gifts we buy are from Amazon and he gets 5% cash back. Also, I know many folks who choose to cash in their credit card points around the holiday season to buy gifts for family and friends. That’s another inexpensive way to purchase gifts for people if you are low on cash.
6. Shop Black Friday sales strategically. Make no mistake, there are a lot of great deals to take advantage of during the holiday season. That doesn’t mean you need to take advantage of all of them. Being strategic about your Black Friday shopping allows you to benefit from the deals without breaking the bank.
Tip: Start making a list in advance of what you’d like to purchase for each person and keep an eye out for sales. If you know what you’re looking for, Black Friday sales can be incredibly helpful. However, if you aren’t quite sure, it can be a good way to take advantage of great deals without having a set purpose in mind for your purchases.
How are you preparing financially for the holidays: Any savings tips? Unique gift ideas? Share in the comments below!
P.S. Still on the fence about my Marriage & Money Session? Leave a little space on your Christmas list for the Black Friday deal that I’m releasing next week! Curious what it will be? I’ll give you one hint – it will fit in the $50 or less category!