Good habits for holiday shoppers.
The holiday season will be upon us before we know it. With it will come the anxieties of a period that is typically associated with excess. When it gets to January you don’t want to be burdened with debts. And while you might not be able to remove all the stresses, you can do something about money worries. Here are some tips on how you can stay solvent and still enjoy the season.
Leave your credit card at home.
“Spend actual physical cash,” says Eddy Elfenbein, author of the Crossing Wall Street financial blog. “When you are turning over something you can touch, it sends a message to your brain,” he says. “It might sound ridiculous, but it works.” Better still, when the cash is spent, it is spent. It becomes very clear when you have reached your limit. If you allocate $500 for gifts and knick-knacks, call it a day when your stash gets close to zero.
Set a time deadline.
Elfenbein also advocates having a deadline by which point all the shopping should be complete. “Think of gift buying as akin to stock investing, as a business,” he says. “You need a clinical approach.” Setting a time limit is part of that business-like tactic, and helps avoid last-minute impulse purchases. To some people, that method might seem to take the joy out of the season. But when it comes down to it, doing otherwise might cause financial hardship, taking the pleasure out of other parts of your life.
Make a budget.
“Obviously the right way to prevent overspending is by planning, setting a budget and sticking to it,” says Tom Essaye, editor of The Sevens Report, a daily macroeconomic newsletter. “But we all know that’s a lot easier said than done when we get caught up in the Christmas spirit.” He’s right it can be hard to achieve, but he points out that if you go overboard and fill up “your financial stockings with debt,” then you are making credit card companies rich. So, work out what dollar amount you can afford for the holiday season and then spend not a penny more than that.
Use a dedicated savings account.
A key question is how much to set aside for gifts and other items. That is clearly going to vary by family size and income level. One idea might be to establish a savings account to which a small amount of money is deposited each pay period throughout the year. What is small is different for different people, but if you don’t miss the amount you save, then it’s probably safe to say that it isn’t too much. Simply putting in $30 every two weeks will total $780 over a year, which makes a nice stash with which to go shopping.
A gift that lasts.
Newborns and toddlers are often showered with toys in the holidays, and that’s appropriate as far as it goes. But what about putting some cash into a college fund for your favorite baby? If invested in stocks, the money will have time to grow and then give the recipient a leg up in their efforts to finance their education. There are ways to do this efficiently such as through a 529 plan. They are specifically designed for college savings and have certain tax benefits.
Make your gifts.
There may be times when you are simply too broke to spend anything. That doesn’t mean you can’t give gifts. But you might have to be inventive. If you are artistic, maybe you paint a picture. Or you could offer to cook a meal, or tidy up someone’s garden. Giving doesn’t have to be about spending money.
Give to charity.
For one family, a collective decision meant doing something different than just spending money on gifts. “Each of us give money to a pool for charity,” says Dave Ellison, a portfolio manager with Hennessy Funds in Boston. He is one of eight people who give $100 each to a charity — and pooled together, the donation is a meaningful amount. “It keeps the spending in check,” he says. But also it reminds him and his loved ones what the season is about — which is clearly not about avarice.”
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7 Ways to Avoid Financial Stress Over the Holidays originally appeared on usnews.com
