Don't Let Money Stress You Out During the Holidays
If you are like most people, you probably stress out at least a little when it comes to the holidays and your money. Holidays can be difficult enough with the pressures of things to do and entertaining family and friends without the added pressure of worrying about your money.
We at Nevada Family Wealth believe that some people make the holidays harder than they have to be due to one major reason, lack of planning. How much money do you plan to spend on gifts this year? Who are you buying presents for? Will you be traveling during the holidays? If so, will you drive or fly? How much will that cost?
Another reason people get into financial trouble during the holiday season is because they use credit cards to finance their gifts and travel. It is easy to get caught up in the moment and buy gifts you cannot afford when all you have to do is “swipe”. Come January, reality sets in. You spent money you couldn’t afford to pay back immediately. For most people, this leads to emotional stress which could have been avoided if they had followed these steps when planning for the holiday season and beyond.
Step 1: Set a budget for gift giving
We recommend sitting down with a pencil and paper (the old fashioned way) to determine how much money you can afford to allocate toward gifts. You may consider reviewing your online bank account and credit card records from last year to determine how much you spent the previously. Once you have your budget you should write down the name of each person you plan to give a gift to this year. We would suggest writing down what you would like to buy for each person on your list. Many people don’t realize how many people they buy gifts for each year. Don’t forget people such as your hairstylist, the newspaper delivery man, the garbage man and your children’s teachers. Little by little, the additional gifts add up.
The next step is to assign a dollar value to each person on your list. The total amount of each gift should not exceed your overall budget. If so, make adjustments. We would recommend gift cards for acquaintances. This will allow you to lock in the value for each gift without having to worry about taxes and shipping costs. Staying within your budget, although sometimes difficult, will be well worth it.
Step 2: Create a holiday account
Christmas Clubs were accounts introduced by some banks during the Great Depression. Banks allowed customers the ability to deposit funds into a separate account specifically earmarked for Christmas purchases. These accounts usually paid a higher interest rate than a normal savings account but typically restricted withdrawals to the holiday season. These accounts are still available at some financial institutions but every year they become less available. We recommend opening a separate savings account at your current financial institution that you can make automatic monthly systematic additions. Many financial institutions wave account fees if you make such additions.
The million dollar question you may be asking is: “So where does the money come from?” Once again, budgeting is usually the answer. You should probably start saving for the holiday season in January! By doing this, you spread the expense over twelve months versus two or three. This sounds overly simplistic but you would be surprised how much you can accomplish if you give yourself enough time. This simple planning will help you avoid a financial holiday hangover.
Jim Marren is a CERTIFIED FINANCIAL PLANNER™ professional. Investment Advisory Services are offered through Raymond James Financial Services Advisors, Inc. Nevada Family Wealth is not a registered broker/dealer and is independent of Raymond James Financial Services. Securities offered through Raymond James Financial Services Inc., Member FINRA/SIPC. He is located at 401 Flint Street in Reno, NV. Contact him at 775-321-6200 or www.nevadafamilywealth.com
This information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Opinions expressed are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. Raymond James does not provide tax or legal advice or services. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and CFP® in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.