It seems every year I’m writing this column earlier and earlier. Just the other day I read a story that Amazon, Walmart, and other large retailers are now starting their holiday sales. It used to be that holiday shopping started after Thanksgiving, not anymore. Because the holiday shopping season is starting earlier and earlier, I thought it was appropriate to discuss gift-giving during the holiday season.
It is shameful when you hear that many Americans are just now paying off their debts from last year’s holiday season. I can guarantee you that no one that you care about or cares about you wants you to go into debt to buy them a holiday gift. The holiday season should be filled with joy and happiness, not anxiety and worry over how you will pay for holiday gifts. Even though retailers want you to spend, spend and spend some more, those who love and care about you are more concerned about your well-being than a gift they’ll receive. Therefore, it is important that before you begin your holiday shopping you set a strategy so that you don’t overspend and get yourself into financial difficulty.
I believe there are two main steps you need to do before you embark on your holiday shopping. The first is to set a budget. You should know before you begin your holiday shopping how much you are going to spend in total. I can’t tell you how much to spend but I can tell you that if when the holiday bills come due you can’t afford to write a check and pay it off in its entirety, you are probably spending too much. Yes, we all use charge cards and they are a convenient way to make purchases; however, charge cards are the worst way to finance a purchase. If you can’t afford to pay your bill when it comes due, in reality, what you are doing is adding another 20 percent on to the cost of the gift. Twenty percent is about the average credit cards charge in interest. The only way to avoid the outrageous interest rate on charge cards is to pay your bill on time.
The second step to being fiscally responsible during the holiday season is to write a list ahead of time as to whom you have to buy gifts for. You don’t have to buy gifts for every person you know and sometimes gifts can be something you make as opposed to something you buy. The bottom line is that if you know who you have to buy gifts for, it will make it easier to stay within your budget.
Even though the economy has improved, the financial health of the average American family is still poor. That is why families and businesses where gifts are exchanged should get together and put limits on what can be spent on gifts. This alleviates much of the financial stress that many people feel during the holiday season. It also has another consequence and that is it can result in some very creative gifts. The bottom line, reducing financial stress during the holiday season allows your family, friends and loved ones to better enjoy the holidays.
The key with setting a budget and listing ahead of time whom you are going to buy gifts for, only works if you follow it. It is important to have the discipline to stick with your game plan. Remember, never equate how much you love someone by how much you spend on their gift; it doesn’t work that way.
As the holiday shopping season is upon us, don’t be like the millions of Americans who are still paying for last year’s holiday gifts. Rather, you want to be like those who were fiscally responsible and truly able to enjoy the holiday season knowing they could afford their purchases.
Good luck!
If you would like Rick to respond to your questions, please email him at Rick@bloomassetmanagement.com.