Retirees may be facing a different-looking holiday this year, with changes that include canceled trips or smaller gatherings. These shifts can also have a money-related impact. For retirees on a fixed income, it may be helpful to set up a financial strategy that aligns with the holiday activities in 2020.
Here’s how to manage holiday spending and avoid financial missteps:
— Rethink your budget.
— Set amounts for gifts.
— Evaluate holiday meals.
— Shift travel funds.
— Look for ways to save.
— Monitor credit card charges.
— Take advantage of extra sales.
Rethink Your Budget
If you had a budget in place for the holidays, it may be a good idea to look at it again. Some of the items might need to be changed or removed from your budget based on adjustments in plans and activities. “If you don’t have a budget, now is a great time to create one,” says Lauren Wybar, a senior financial advisor at The Vanguard Group in Philadelphia. “A good starting point is to develop an itemized list of all of your expenses.” You could set up financial buckets for the holidays, such as special events, charities, decorations and gifts for family and friends. “Determine if these expenses are necessary or discretionary, and if you are comfortable with them given your savings and retirement income,” Wybar says.
Set Amounts for Gifts
Your gift list might be longer or shorter than it was last year. For instance, if you won’t be seeing some family members over the holidays, you may decide to give them an extra gift. At the same time, if finances are tight, you might not plan to purchase as many gifts as you have in the past. “Setting spending limits on each gift is a great way to maintain your budget,” says Chuck Czajka, founder of Macro Money Concepts in Stuart, Florida. If you plan to ship gifts rather than give them in person, you’ll want to include the cost of shipping in your overall gift budget.
Evaluate Holiday Meals
If you usually have children and grandchildren over for special dinners during the holidays, you might decide to cancel the meals this year. “If you are cooking for one, two or four — versus your usual 10 — think very carefully about what you really will eat,” says Tanya Peterson, vice president of brand with Freedom Financial Network in San Mateo, California. “There is no need to buy and cook the dinner you may be used to, unless you are intent on having leftovers to freeze.” If you want to make a turkey or a large ham, you can roast it before any special meals and divide the cooked meat into smaller packages that you place in the freezer. “Then take out what you need for several meals during the holiday season,” Peterson says.
Shift Travel Funds
If you purchase plane tickets to fly in December, but decide to stay home and not use the tickets, check with the airline to see about reimbursement. You may receive credit to use toward a flight in the future. If you were planning to drive to see grandchildren, consider the budget you had set for the trip. This might include money to spend on gas, food and hotel stays. You could decide to save the funds and put them toward an upcoming trip.
You might also consider using the travel money in a different way. “Retirees who aren’t traveling for the holidays may find themselves with some extra cash in their budgets that they can dedicate to a non-traditional gift, like a college savings account for their grandchildren,” says Jeremy Gove, a financial planner for Stonebridge Insurance and Wealth Management in Kearney, Nebraska.
Look for Ways to Save
If you usually host a large New Year’s Eve gathering at your house, you might decide to not hold one this year due to the pandemic. The change could mean you have extra funds that aren’t spent on food and decorations for the party. “Cancelled holiday plans mean an opportunity to save money that is typically spent this time of year,” says Nicole Scanlon, managing director of family wealth at Olson Wealth Group in Minneapolis, Minnesota. You may decide to keep the funds in an account and use them toward home improvements or a gathering in the upcoming year.
When spending extra time at home, there may be free activities that you can do with those in your household. You might pull out a puzzle, play a board game or look through photo albums. “Those looking to get outdoors can do so in a way that costs nothing by going on walks, cross country skiing or sitting around a bonfire,” Scanlon says.
Monitor Credit Card Charges
When shifting plans, it can be more difficult to pay attention to how funds are spent. For this reason, focusing on using a debit card or cash might make it easier to track funds. “Try not to use credit cards unless you can pay the balance by the next billing cycle,” Czajka says. “The last thing you want to do is spend 2021 paying off 2020’s holiday season.”
Take Advantage of Extra Sales
Many retailers are shifting away from a single Black Friday sale to avoid drawing large crowds. Instead some shops are offering online deals or in-store discounts that are valid for the whole month of November and even into December. “Gift givers have extra time to plan their shopping lists and look for the best sales to fit their budget,” Gove says. This could help stretch dollars further or enable you to purchase a gift with a high value for a lower price.
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