Managing Your Spending During the Christmas Holidays
In the wake of the re-opening of the economy following the COVID-19 lockdown, inflation was inevitable. Despite the low levels of unemployment, many Canadians are finding that their income is not keeping up with their expenses. Nevertheless, the desire to engage in gift-giving during this holiday season is probably as strong as ever. How do you meet that desire while acknowledging your financial limitations?
Gift Number One If You Are a Parent
This is my conviction as a financial planner. I think that one of the most important gifts you can give your children is financial stability. Sure, there is emotional satisfaction in seeing your kids’ eyes light up at receiving gifts they have been longing for. However, if you want to provide a gift that will last, spending within your means over the holidays so that you don’t become anxious about paying the rent or mortgage, heating your home, or providing nutritious food, will become a gift that lasts.
In the book, Facilitating Financial Health, the authors discuss several problematic money behaviours, one of which is Overspending. Among the questions to ask yourself as you anticipate your holiday spending:
- Do you purchase things with money you don’t have?
- Do you carry a balance on your credit card from month to month?
- Are you too broke at the end of the month to save for retirement?
- Do you frequently lose sleep or fight with your spouse about your spending or your debt?
- Do you hide the amount of your debt or your spending from your spouse?
- Do you make promises to yourself or others about limiting your use of credit cards but find you can’t keep those promises?
There is certainly satisfaction in spending money on gifts. After all, gifts are for others. Your spending is for altruistic reasons. For some, perhaps many, Canadians, spending may even amount to an addiction. However, consider that there may be ways to achieve the satisfaction of gift-giving while keeping your spending under control.
Some Ideas to Keep Your Gift-Giving Under Control
Make a List
In other words, make a gift-giving budget. Brainstorm gift ideas, figure out how much they cost, and set a limit on how much you can reasonably spend. Then go back over your list and allocate the gift ideas to your intended recipients accordingly.
I see value in doing this on at least a couple of fronts. If you go Christmas shopping at your local mall, you are likely to see a wide variety of potential gifts that you might be inspired to buy despite the negative impact they would have on your spending room. Do not underestimate the ability of merchandising specialists to trigger impulse buying! Starting in advance with a thoughtful approach will help you to manage those expenses.
Second, if you have given some advance thought to the gifts you want to give, you may be more likely to provide something that is appreciated by your gift recipients.
Keep a Record of Your Expenses
This is a crucial step to take. Tracking your expenses reminds you that you are actually spending money. This is especially important if you are using a credit card since there is not an immediate impact on your cash balance.
This also has value in other ways. If your plan includes giving gifts to multiple people, perhaps because, like my wife and me, you have four children, you will want to equitably balance your gift-giving. Furthermore, while returning gifts is a time-honoured tradition, returning an item that you had intended to give only to replace it with something else is a hassle that we would all do well to avoid.
I am ambivalent about this suggestion. On the one hand, I do buy things online myself. It is convenient and it eliminates the need to mingle with others and potentially catch a dangerous virus. It is also often less expensive. On the other hand, one of the messages that was spread in the wake of COVID-19 was to shop locally. Having said that, probably most stores have websites these days that allow you to shop online as well. If they do not, you can still do your shopping research online and then go to your local store to make the purchase you want.
Do a Gift Exchange
This makes particular sense for gift-giving among money-earning adults. Setting a dollar limit and picking the gifts by a random draw cuts down on costs and, potentially, clutter, and puts the emphasis where it belongs, on the gathering of friends and family.
Don’t Use Your Credit Card
This is often suggested as a good idea regardless of whether it is intended as a way to rein in spending at Christmas. By only spending what you have available in cash, you are sure to keep within a reasonable range. On the other hand, using a single credit card allows all your spending to be presented in a single list and if you use a credit card to earn travel points or cash-back rewards, opting for cash or a debit card does cut into those opportunities.
Having said that, stores are now allowed to charge extra for using credit cards, although I haven’t heard of that happening yet. In addition, no matter the reward you receive for using a credit card, its value is entirely lost if you don’t pay off the card balance in full by the due date. Earning 2% on a purchase doesn’t do you much good if you are paying 20% on the unpaid balance.
So, if you can stick to your spending list and you can pay off the full balance owed every month, then you can probably use your credit card. As always, consumer, know thyself.
Give Homemade Items
This depends on the talents a person has cultivated, of course. My sister is talented at cross-stitching and has provided deeply personal gifts of that sort in recent years. For others, baking may be their special skill. Christmas cookies are an often sought-after item. Jams, jellies, or other spreads are also welcome reminders of fresh fruit eaten earlier in the year.
This idea could be included under the suggestion to make a list but here I am suggesting that you consider two things: 1) Open a separate online savings account and start depositing the money you want to spend during the holidays, paycheque by paycheque. That way you don’t have to scramble to find extra hundreds (or thousands?) of dollars in the space of a few weeks. 2) If you build out your gift-buying list right at the beginning of the new year, you can do your shopping throughout the year as the opportunity presents itself.
Recycle (Sell) Old Gifts
No doubt some of the gifts given to your children a year or two ago may no longer be suitable. Rather than having them take up space, lying unused in a corner of your home, consider selling them to generate some money for new gifts.
Buy Gifts Second-Hand
The other side of the coin when it comes to selling old gifts is to buy gifts that are new to your household but come from second-hand sources. Not every item may be suitable or available by this path, but it is worth considering.
Limit Gifts for Infants and Young Toddlers
The classic example of this recommendation is the image of a young child who has gotten a precious gift from a parent, grandparent, aunt, or uncle, sitting in the box that the gift came in and imagining some made-up world (see the featured image at the top of this post). Engaging with your young child, grandchild, niece, or nephew is certainly more meaningful than a toy that they are not old enough to appreciate.
If I may offer an alternative, consider a monetary gift that the parents can use to help fund a Registered Education Savings Plan (RESP).
Consider Consumable Gifts
Again, this makes great sense when exchanging gifts among adult friends. This can include things like a bag of fair-trade coffee, chocolate, a fruit basket, cookies or other favourite baked goods, more technology-oriented items like a gift certificate to a supplier of e-books or audiobooks, or personal things like body lotions or lip balms, or really practical things like a gift certificate to the supermarket where your gift recipient shops.
This is not by any means an exhaustive list. However, implementing even one or two of these ideas (an internet search will help with that) can make your gift-giving just as much fun as it always is, while leaving you with a greater sense of financial calm than you might otherwise enjoy.
This is the 175th blog post for Russ Writes, first published on 2022-12-05.
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Disclaimer: This blog post is intended for general information and discussion purposes only. It should not be relied upon for investment, insurance, tax, or legal decisions.
Photo by Anna Shvets