Just here those shop bells ring-a-ling, register ding-a-ling-ling...It’s time to feel your savings and wallet drain..ain…ain..ing….
That’s right folks, it’s Christmas time. Retailers aren’t going to let you off the hook easy this year, either. Just like seasons past they were decking the halls sometime around, well, September. In case you’re like me and just now getting on the Polar Express and putting together your holiday plan (you know, like normal people do after Turkey-day when it’s actually time), I thought you might want some friendly advice from our good little elves over here at USAA.
I was able to corner these two little guys right before they clocked in to get to work making calculators, retirement planning tools, and...oh, wait that’s right, they’re planners. USAA Certified Financial Planners that is. My good friends JJ Montanaro and Scott Halliwell are here so that I can pick their brains about holiday spending.
Tara: Ok guys, why is it important for me to set a budget for my holiday spending?
JJ: This is an exciting time of the year and it’s very easy to turn excitement into a financial disaster by going overboard. A budget is a firm commitment as to how much one can afford to spend for the holidays. It provides spending guardrails. Establishing a budget should be your first step for the holidays. It makes sense to set your spending limit before you build your shopping list. Then, build a list that falls within your set budget. You’ll have a much more pleasant experience doing it that way than chopping a list down due to lack of money.
Tara: What is a “typical” amount to spend on loved ones, if any?
Scott: According to the fine folks at Gallup, about $700. It’s interesting that the same survey shows that only 26% say they’ll spend more than that. From a financial planner’s perspective though, these numbers can be dangerous because they can often help people rationalize spending more than they should. When it comes right down to it, everybody should spend what’s appropriate for their specific family financial situation….not try to keep up with the Jones’ (or Gallup’s).
Tara: Any tips for stretching said budget?
JJ: There is always the typical draw names, use your talents and provide services, or make your own gifts. These are all ways to reduce what you’re spending for the holidays. At our house, we tend to focus on the kids and have agreed to limit what we spend on each other. The key is to have the conversation in advance so that you don’t have any hurt feelings. That goes for you and your spouse –and you and your kids, too.
Tara: At my house we call that – not just about Christmas either – expectation management. Are there things that people forget to add into their budget when they’re adding it all up?
Scott: Holiday décor, postage for cards, gifts for coworkers – these are all types of things that get missed. I think people also forget the extras they spend on things like holiday parties as well as extra food and beverages during the holiday season. Though I don’t have any statistics to back it up, I’ll bet the average family’s December grocery bills are significantly higher than other months.
Tara: Ok, I set the budget. Why is it important, now, that I stick to my list?
JJ: Your list will keep you out of trouble. I know in my own personal experience in the grocery store or on the hunt for holiday gifts that sticking to my list made in the calm of my kitchen or living room has saved me a lot of money and reduced my temptation. Have you ever been to the store when you’re hungry and without a list? It’s dangerous and your wallet can take a huge hit.
All great points. Thanks for sharing, my little financial elves!
Do you have a holiday budget? What does it include?
Do you make your list after or before you set the budget? Or do they work together?
What spending limit do you typically set for family members?