It’s that time of year when the holiday spirit can get the best of our wallets.
American consumers plan to spend about $935 each this holiday season, down from last year’s record spending of $952, but still the second-highest level since 2004, according to the National Retail Federation.
The NRF also found that almost nine in 10 Americans said they could be persuaded to shell out an unplanned $25 for a good sale or promotion, a perfect gift or free shipping. But that’s the kind of thinking that can create money trouble later on.
“No one wants to be a Grinch or Scrooge,” says Marguerita Cheng, CEO of Blue Ocean Global Wealth in Potomac, Maryland. “But we certainly don't want to experience a holiday hangover with bills from shopping hitting our mailboxes in early 2017.”
How do you avoid spending more than you meant to? Here are a few tips:
“The natural answer to the question is to establish a budget. How boring is that?” says Chris Chen, a certified financial planner in Waltham, Massachusetts. It’s pretty simple: Figure out how much you want to spend on gifts this year in total, and then determine a budget for each person on your list.
But don’t stop there, says Cynthia Boman Thompson, a certified financial planner in Portland, Oregon. Include costs for wrapping paper, gift tags, gift bags, tissue paper and shipping. “These expenses can add up and blow your budget,” she says.
And don’t forget other holiday-related expenses such as food, decorations, greeting cards, babysitting for holiday events, gifts for service providers, donations, holiday clothes and other accessories. The NRF estimates that Americans will spend $207 on average for items that aren’t gifts.
2. Whittle down the list.
If your budget is bloated, it’s time to strike off some names, says Peter Creedon of Crystal Brook Advisors in Mt. Sinai, New York. Start with extended family members and friends, and send a card instead. Bring homemade cookies for colleagues at work instead of individual gifts.
If the list is still too big, consider getting gifts just for the kids in your family and organize a Secret Santa or other gift exchange (with a reasonable maximum budget) for the adults in the family. That’s still festive, but affordable.
3. Make a plan.
Once the list is complete, plan what you want to buy for each person on the list. Being specific increases the chances that you will stay disciplined while you shop, says Arthur Ebersole of Ebersole Financial in Wellesley Hills, Massachusetts. “Holiday shopping done at the last minute is much like grocery shopping while hungry,” he says. “You end up buying a lot of junk that no one really needs.”
Do your shopping in one or two days, says Joel Cundick, a financial advisor at Savant Capital Management in McLean, Virginia. “This will not only save on your gas budget but also on your level of anxiety and worry throughout the holidays,” he says.
4. Track spending.
“Be like Santa,” says Kristin Sullivan of Sullivan Financial Planning in Denver, “only with a modern twist.” She recommends downloading a holiday shopping app to your phone — such as Santa's Bag, Christmas Gift List or Gift List Manager — to track your gift purchases. This allows you to monitor your spending “so you are aware as you shop [and are] not surprised by the January credit card bill,” she says.
5. Find discounts.
Get the best deals on your gifts by shopping around and comparing prices. Ask stores to price-match if you find your item at a lower price somewhere else. Try apps like RetailMeNot, Shopular or Priceblink to find coupons for different stores, says Cary Carbonaro, a financial planner at United Capital Financial Life Management in Clermont, Florida.
6. Pay with a credit card.
If you’re disciplined, consider putting your plastic to good use. Figure out which cards in your wallet offer cash back or statement credits on your purchases. A new app called Wallaby Financial for Androids tells consumers which credit cards offer the most savings based on where they are shopping. Also, look into opening a card that offers a sign-up bonus after making a certain amount in purchases after three months. (Make sure that amount fits into your budget.)
If you’re doing shopping at just one store, consider opening a store credit card to get the first-purchase discount. Again, make sure you spend only what you’ve budgeted and that you can pay it off immediately. Otherwise, your credit purchases rack up interest, making your overall holiday shopping more expensive.
7. Or, pay in cash.
If you know that credit cards tempt you to overspend, then stick with cash, says Jane Nowak, a financial planner with Wealth & Pension Services Group in Smyrna, Georgia. Only bring how much you have budgeted and make purchases until that wad disappears, and nothing more. “Old-fashioned, but effective,” she says.
8. Keep your eye on the ball.
Bring a reminder of your overall financial goals with you while shopping, says Boman. “Is it money for a special vacation? Funds to help pay down your debts?” she asks. “Pull it out while you are holiday shopping and then review the items in your basket prior to checkout to see if that is really how you want to spend your money.”
9. Remember, meaning is more important than price tag.
“Think about gifts that are meaningful and not just expensive,” says Ebersole. “Some of the best gifts that people receive are those that show you put some real thought into it.”
Add something special to a lower-priced but thoughtful gift with a handmade extra such as baked goods or an offer for a service such as babysitting or snow shoveling.
“The holidays shouldn't be about giving and getting things,” says Ebersole. “They should be about showing people how much they mean to you and while this requires some thought, it doesn't require a lot of money.”