By FPA member Lisa A. K. Kirchenbauer, CFP®, RLP®
Last Updated: November 15, 2010
It’s that time of year again and as we continue to make our way out of the recession, it’s important to look for creative ways to make the holidays enjoyable without breaking the bank. Most experts believe that the way to keep the holidays from creating a financial “hole” that you’ll spend months digging yourself out of is to have a budget before you begin spending. From there, there are other creative ways to keep the holiday expenses reasonable if you just take a little time to plan.
Before we jump into some creative ideas around gift-giving, let’s take a moment to talk about the importance of budgeting and “conscious spending.” Budgeting is no more than having a spending plan before you begin making those holiday purchases. Make a list of everyone you plan to buy gifts for along with an estimate of what you would like to spend on them. Then, add the miscellaneous expenses associated with the holidays such as buying decorations, extra food, charitable contributions, parties, and the like. So, how does it look? Can you really afford this? Do you have the money now or in January to cover all this? If not, it’s time to step back and take a more conscious and creative approach to making the holiday budget work. So, what does “conscious spending” really mean?
First, it turns out that we spend more when we whip out our credit card than when we pay cash or check (or use a debit card). Second, it means that before you run out to the holiday sales and just start buying things because they’re a great deal, think about whether that’s what your loved one really wants. Did you ask them? What would really make a difference for them? How about the gift of time? Or something they never spend money on for themselves? Take a moment to think about your motivations. Sometimes we spend more to make up for something or because we feel we need to. Honestly, a thoughtful gift that shows that you took the time to think about what the person likes and needs is much better than just spending a lot of money. So, taking a more conscious and planned approach to holiday spending can make for a more rewarding holiday experience without the financial hangover in January and beyond!
And now for some creative ways to trim your expenses:
- Try using Mint.com or Quicken to track your expenses once you have a spending plan. You can set a budget and then you just have to check in periodically to categorize some of your transactions. It can pull transactions from your checking account as well as credit cards. Mint.com will also send you email reminders if you are going over the budget for the month.
- Consider using those credit card points to buy gift cards or even gifts.
- Take advantage of after Thanksgiving sales to get great deals and spread your expenses over more than one month (especially if you are paying cash).
- Consider “experience” gifts. Studies have shown that these kinds of gifts are much more remembered and treasured. Take your children to dinner and a special show or play, take your mother to tea, go to a special golf course with Dad, get away with your spouse or significant other for an evening on the town instead of another traditional gift.
- Ask your extended family, especially if you have a big one, about drawing names for gifts (instead of having to give to everyone) or consider just giving gifts to the children and have the adults pass on gifts.
- Consider gifts of “time or service.” Does a tired mother just need an afternoon off while you baby-sit? Likewise for the working couple with a new baby. Are you good at something that others aren’t? Consider offering that as a gift. This is a great option for kids with limited budgets but lots of energy.
- Trim back the holiday party spending without giving up the party: cocktail party vs. dinner or potluck vs. you do it all.
- Remember that sometimes less is more.
In short, there’s no reason that the holidays can’t be abundant and fun without taking a big piece out of your savings and monthly budget. With a little planning, conscious and creative gift-giving, you may even have a more rewarding and memorable holiday season than in past years because of this thoughtful approach.
And one more tip: Consider starting to save now for next year with a small savings account at the bank. Imagine how easy that will make it next year!
FPA member Lisa A.K. Kirchenbauer, CFP®, RLP®, is the president of Omega Wealth Management.