It’s safe to say that this year has been a wild ride and there’s a good chance that your finances have taken a hit as a result of the coronavirus pandemic and all that’s followed.
With the holidays just around the corner, this can be an extra stressful time financially with the added pressure of gift giving and various other holiday-related expenses. Brittney Castro, a CFP at Mint, suggests taking some time to evaluate your current financial life and how you’re going to navigate the holidays.
“For better or worse, this year has created a lot of change in people’s financial lives.” Castro said.
To help guide you through this, we’ve gathered a list of helpful tips for navigating the holidays if you’ve taken a financial hit.
Set a budget and stick to it
This may seem like an obvious step, but a surprising number of people don’t create a holiday-specific shopping budget, said Jaspreet Chawla, SVP of savings products at Navy Federal Credit Union and a big proponent of having a dedicated holiday spending account.
By having a dedicated spend account, you’ll likely have a clearer view of your spending – helping to keep your budget in check.
“When you make and write out a budget, you’re much less likely to get distracted by holiday sales and overspend,” Chawla said. “Once you decide how much you can spend overall, break down your budget by how much you intend to spend per person. Getting even more specific with your intentions can help you stay on track.”
Make a plan as a family
It’s never fun cutting back, but it’s often a necessary step to take when rebuilding your finances after taking a hit. But to be successful in this, everyone should be on the same page.
That’s why Greg Klingler, a CFP and director at the Government Employees’ Benefit Association, or GEBA, in Fort Meade, Maryland, suggests that families take the time to make a plan before the season begins.
Some potential strategies to include in the plan are as follows:
• Consider drawing names as a family versus buying gifts for everyone
• Set a family spending limit
• Create a spreadsheet to identify where you could potentially overspend this season
• Start saving for next year immediately
Don’t forget about nongift expenses
It’s not only the gifts themselves that you have to worry about, but there’s a whole slew of other expenses that can put your budget over the edge if not taken into consideration, Klingler said.
Some common nongift expenses to factor in include the following:
• Gift wrap/gift bags
• Christmas cards
• Tips/holiday bonuses: cleaning crew, mailman, building superintendent
• Hosting duty: food, house cleaning, decorations
• Travel costs to visit family
• Charitable donation
Only buy what you can afford at the moment
Regardless of the season, a good rule to follow is to never spend more than you can afford – especially when it comes to unnecessary items like gifts.
“If you can’t afford it outright, you can’t afford it. Don’t risk incurring debt to pay it off,” Klingler said.
Putting gifts on layaway can be tempting, but Klingler warns that the interest rates on debts like this can be high. Another tempting option may be to use Afterpay, a payment service that allows you to buy now and pay later via installment payments. However, this method could easily lead you down a slippery slope of debt.
See where you can use and earn rewards
Between credit cards and store loyalty programs, you could save big just by leveraging what’s already in your wallet.
Credit cards, for example, can help you earn cashback on your purchases or allocate earned rewards towards your shopping, which isn’t typically recommended but can make sense in some cases.
Additionally, if you do a lot of your shopping at a specific store, make sure you’re enrolled in their loyalty program so you can get rewarded for your spending and maybe even get a discount or two. These are usually free to join and should only require information like your name, phone number and email – no credit card or other payment information.
Finally, if you’re shopping online, make sure you’re taking advantage of discounts and cashback offered by shopping portals such as Honey and Rakuten. These browser extensions can lead to some serious savings, and all it takes is a simple click of a button to activate the discounts.
hink outside of the (gift)box
If you’ve fallen on hard times financially, the thought of giving gifts this year can be stressful. But remember, not all gifts have to be fancy and new – you can make something yourself or pass something down. These types of gifts can end up being among the most memorable.
“People appreciate you putting in the effort to make something handmade,” Chawla said. “The holidays are less about spending money and more about spending time with the people you love and showing them you care. In a turbulent and uncertain economy, you can still get into the holiday spirit, even if you have to skip your usual shopping trips.”
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