This holiday season demands spending discipline – Twin Cities
With inflation taking a bigger bite out of the family pocketbook in 2022, the holidays could be an especially stressful period this year. According to pwc’s 2022 Holiday Outlook survey, 35% of higher-income shoppers plan to spend more than they did last year — an average of $1,430 on gifts, travel and entertainment.
Here are a few tips for making it through the season without spending more than you’re comfortable with — and focusing more on spending time with your friends and family without breaking the bank.
Make a list, and check it twice
It’s very easy to get caught up in the emotions of the season and buy more than you need. Impulse shopping can feel great while you’re in the store, but when bills come due, a wave of buyers’ remorse can follow.
Making a holiday list is always a good idea. Not only does it set limits on how much you’ll spend for each person, and your overall spending, but it also forces you to consider what gift would be the most personal expression of your feelings for everyone in your circle.
Start with a budget
The best way to control your holiday spending is to set a budget before you get too far into the season. Make sure that budget includes items beyond gifts. If you plan to travel or entertain a lot, for example, you should include any related gas, airplane tickets, hotels and food and beverage costs. Also, factor in the non-holiday related gifts and charitable donations you may be making to trim your tax bill for 2021. Some advisers recommend limiting your total holiday spending to 1.5% of your annual income, but, of course, you should decide what level works best for you.
Keep an eye on credit cards
In 2015, 80% of consumers said cash was their preferred payment method — by far the most prevalent option. Today, as a variety of contactless payment methods grow in popularity, the top spot goes to debit cards, with 60% of consumers ranking it highest among their top three choices.
If you’re someone who tends to carry a balance on your credit card each month, you should strongly consider leaving your card behind before heading to the mall. The ease and convenience of paying by card is quickly reversed by paying more in interest expense for gifts and services than you intended or budgeted.
Instead, try putting all the cash you’ve allocated for the season into an envelope. When it’s gone, stop spending.
Don’t carry cash? Using debit cards may have an edge over credit or store loyalty cards, as you won’t be able to spend more than what’s in your bank account.
Of course, if you’re someone who can use your credit cards efficiently — as a convenient way to shop, paying off the balance in full each month, incurring no interest charges — hats off to you!
Shop for what you value
Although surveys reveal that roughly three out of four consumers will wait until the last weekend in November this year for the best deals, we’re not convinced that you’ll get such great bargains, whether you prefer to shop online or in brick-and-mortar stores. Instead, think about keeping a holiday list on your phone and shop for deals over the course of the year.
In addition, if you are looking to buy things for others that reflect your personal values of sustainability and purpose, focus on buying trusted brands — even if they are not always the cheapest. Consider shopping locally, or at national retailers that source locally. More of your purchase will go to the people producing the product or service, and less on the energy needed to transport the item to your local market — which is known to be one of the biggest contributors to sticky inflation.
We wish our readers a happy, stress-free season and a prosperous New Year!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Bruce Helmer and Peg Webb are financial advisers at Wealth Enhancement Group and co-hosts of “Your Money” on KLKS 100.1 FM on Sunday mornings. Email Bruce and Peg at [email protected] Securities offered through LPL Financial, member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, LLC, a registered investment advisor. Wealth Enhancement Group and Wealth Enhancement Advisory Services are separate entities from LPL Financial.