EAST LONGMEADOW — It’s often said that giving brings more joy than receiving.
While this sentiment has been echoed throughout history, it’s important to keep it in perspective —especially with today’s pressures around gift-giving and the added stress of holiday expenses.
When gifting for the holiday season, Financial Advisor Bill Kemple of Kemple Financial in East Longmeadow, noted you have to find a “happy median.”
“There are mistakes people make when shopping for the holidays, and it all comes down to not having a budget or sticking to it. Some of the biggest mistakes in terms of spending is not having a realistic budget and getting carried away by the pressures of the holidays to spend, oftentimes more than you have. Other mistakes include impulse buying without thinking it through, overspending on gifts, overcharging on your credit cards, procrastinating until the last minute, and not planning for extra holiday expenses beyond presents,” he said.
Kemple noted there are many reasons for overspending.
“Emotional pressure and the traditions of Christmas have a lot to do with it. People get into the spirit and want to give and show affection and think it is expected of them. Plus, there are the tactics of retailers to get you to spend, such as the tradition of Black Friday. Another big reason is not wanting to disappoint anyone from your kids, who expect Santa to leave a bagful of toys under the tree, to giving to relatives, friends, and co-workers. And just because you have a good amount of credit on your credit cards, doesn’t mean you should overspend your budget,” he shared.
Establishing a holiday budget is essential for not getting into debt come the new year after a buying frenzy and having it derail your other financial plans.
“A holiday budget will give you peace of mind … a certain dollar amount you want to spend, and it will help you through the whole spending process on gifts. It will help you be more mindful and thoughtful in your spending and to prioritize — to know what you have to work with and whom you have to buy for. You can’t possibly buy for everyone, so the budget will help you to prioritize,” Kemple said.
When making your holiday budget, start by reviewing your finances.
“See what you have realistically for extra cash flow. Set a total spending limit as your goal. List all of your holiday expenses and go through them to determine if you have enough money set aside. Allocate money to each person or category. Track your spending to see how you are doing and have a way to do that whether on your phone, on notes or a spreadsheet. Use money that you have, cash or a debit card, and if you do use a credit card, make sure that you have money in the bank to pay it back. And give yourself a little wiggle room because you are going to spend more than you might think,” Kemple said.
To help you stick to your budget, start planning early. Check pricing from one store to another or online — but remember you may have to pay for postage — and don’t underestimate the power of a handmade gift if you are on a small budget. Remember, it is the thought that counts. And, if you only have a small budget within your means this year, as emotionally hard it may be, limit your gift giving and keep within your means.
When putting your budget together, Kemple noted to remember that holiday spending goes well beyond gift giving.
“It’s the time of year when we are spending more money than usual. Everyone wants to decorate for the holidays. You may be entertaining and holding a party, so there are the costs of food and beverages to consider, or you are going to a party and bringing a gift or other items. If you are still among those who send out holiday cards to family and friends, there is the expense for a box of cards and postage. Who are you sharing the holidays with? Are you traveling? There are always additional and unexpected expenses that may come up,” he said.
According to PwC’s 2024 Holiday Outlook survey, despite 59% of consumers saying that inflation will probably influence their holiday spending this year, overall spending is projected to increase by 7% to an average of $1,638 per shopper.
“In today’s economy with inflation driving up the cost of just about everything, it is easy to go beyond $1,600. A budget will help keep you on track,” Kemple said.
The East Longmeadow financial advisor said it is all “relative” as to how much everyone spends for the holidays.
“Some people go all out for Christmas and that is precisely why it is important to budget in advance. If you want to spend $4,000, for example, then you need to make sure you have factored it into your overall budget. Just as you would prepare a budget for Christmas spending, you should take time to create an annual budget going over your income and expenses. We always spend more than we think we are spending,” Kemple explained.
That is why a budget exercise is an important part of a planning process.
“I stress to be conservative, to make your budget higher, because you are spending more money around the holidays. For example, if somebody were to go through their whole budget and consider maybe how much they are spending on car insurance as well as other major expenses, then that $4,000 could be a big item on your budget. So, creating a budget in advance allows you to see and be more aware of your spending,” Kemple said.
There are many ways you can save before the holidays suddenly arrive.
“I always recommend having a savings strategy … to come up with an amount you want to spend for the holidays and work throughout the year to put that money aside in a special savings account. Some banks and credit unions have what is called a Christmas Club, which is a savings account to help people save for the holidays. Money is deposited throughout the year, or can even be automatically deducted from your paycheck,” Kemple said.
“You can also consider using your bonus from work as part of your strategy or using your bonus points on your credit cards. Some stores offer a lay-away option, where you can pay over time and pick up your items just before the holiday. It may be hard to do, but you can also cut back on spending money on things you really don’t need. Once again, creating a year-round savings plan is number one, where you set an amount of money from your paycheck into savings,” he added.
Kemple also had advice on using credit cards during the holiday season.
“Some people are good with cash, but others prefer to use their credit cards. My advice is when the holiday season begins, have a set amount you want to spend on your credit cards. Then, when the bills come in, the goal should always be to try to pay off the balance,” he said.
In addition to how much they plan on spending, holiday shoppers in PwC’s 2024 Holiday Outlook survey, said they are “embracing both digital innovations and traditional in-store experiences” throughout the purchase journey. While home delivery remains dominant, alternatives like buy online, pick up in-store (BOPIS) are gaining ground.
“I think buying online or in your local store each has their own benefits. Buying online is convenient. You can easily compare prices, more discounts are often available online, and you can read customer reviews. But online shopping comes with the challenges of returning merchandise and the cost of shipping if it isn’t return-free, as well as delivery delays due to the holiday rush,” Kemple said.
He continued, “The pros of in-store buying are that you can actually feel and touch the merchandise and you can get assistance from a store clerk if you need additional information on the product. But, there are also the long lines to consider. Once again, I can’t emphasize enough to start your buying early in the season or even all-year-long, and it really all goes back to planning and having a budget.”
The financial advisor offered tips for what to do if you find yourself in financial trouble after the holidays.
“First of all, discipline and financial awareness is key to your success when spending on holiday gifts and more. But if you do go overboard, assess the damage and go back to your post-holiday budget now that you have to pay the money back, and figure out where that is going to come from,” Kemple said.
He noted to hold yourself accountable and make extra payments if you can.
“You can always consider debt consolidation by applying for a new credit card with no interest, and don’t use your credit cards until you pay the money back. Also, if your bonus comes after the holidays, consider using the extra money to pay off some of your debt. And, if all else fails, consult a financial counselor, if need be, to set you back on track for the new year,” Kemple said.
When it is all over, the National Retail Federation predicts holiday retail sales during November and December to grow by 2.5% to 3.5%, translating to consumers spending at least $25 billion more than last year.
If Ebenezer Scrooge in “A Christmas Carol” by Charles Dickens knew today’s reality, he surely would continue to say “Bah Humbug,” even more so, when it comes to spending and giving at Christmas.
Perhaps the Grinch, written from the imagination of Dr. Seuss, said it better and kinder when he wrote these words for the popular character: “What if Christmas, he thought, doesn’t come from a store. What if Christmas … perhaps … means a little bit more!”
Some thoughtful words to remember.
