A Word to the Wise on Holiday Spending
December in August
August is usually a time when military families are wrapping up duty station moves, squeezing in summer vacations, and getting the kids enrolled in school. The hazy days of summer are not exactly the time when military parents (or kids) are thinking about December holiday wish lists, door-buster sales and gift wrapping.
But, believe it or not, the holiday shopping season will be upon us in just three short months. You may not be ready to see Halloween candy at the drugstore yet, let alone think about December holiday celebrations, but preparing for your holiday spending now can help you avoid being served a heaping side of seasonal debt along with your plate of turkey and stuffing. So here are a few ways you can start your December in August.
Set reasonable expectations
Last year, it was reported that the average American expected to spend $854 on gifts during the holiday season. While many people won’t spend that much on shopping, any spending that strains your finances or saddles you with post-holiday debt is bad for your financial future -- period. Take the time now to talk with family and friends about realistic holiday spending limits. Consider less expensive gift options like homemade gifts. If you have a large extended family, maybe it’s time to start a new tradition of picking one person out of a hat to buy a gift for, rather than everybody buying a gift for every single other person in the family.
Plan, budget, and save
Figuring out who’s on your gift list, creating a holiday budget, and gradually setting money aside can help you avoid overspending, unwanted debt and financial stress. You can find helpful budgeting tools on mymoney.gov. Also, check with your bank or credit union to see if they offer a Christmas club or holiday savings accounts that you can use to save for your holiday goals. Old-fashioned layaway is another option.
Keep the big picture in mind
It can be easy to forget that we spend a lot of money on other things besides gifts during the holidays. Big holiday dinners, travel to see family and friends, and even increased electricity costs to run that massive holiday light display can drain your bank account. Make sure you plan for the cost of all of your extra holiday activities.
Look for ways to save
Doing things like catching early sales, comparison shopping, ordering from sites or stores that offer free shipping, shopping at discount stores, and buying items that offer rebates can help save you money on holiday purchases. Saving money for your shopping and saving money while you’re shopping should be a dual goal.
Watch out for costly surprises
Make sure you fully understand the term and conditions if you’re using gift cards or layaway plans. For instance, expiration dates, inactivity rules and hidden fees on gift cards can eat away at their value if you’re not careful. Take the same cautious approach with store credit cards that you’re offered at checkout. They might save you a few bucks at the register today, but stick you with very high interest rates later.
Avoid holiday debt traps
Not all deals are a bargain, so don’t get sucked in by holiday “super sales”. If you rush to a store sale because you can get a $3,000 TV for $2,000, you’ve still spent $2,000 on a TV. Was that really something you had planned to do? Also, don’t be enticed by payday lenders who want to “help” you get your hands on holiday cash. Proper planning and saving long before the holiday can help you avoid a cycle of high-interest debt that can last for weeks or even months after the holidays are over.
Keep in mind that holiday spending is short-term spending. Once the unwrapping frenzy is over, how long does the excitement last? Saving your money for long-term goals like home ownership, college or a comfortable retirement may be the very best gift you can give yourself and your loved ones.
-- Holly Petraeus is the assistant director for servicemember affairs for the Consumer Financial Protection Bureau.