Holiday Spending – Don’t Shortchange Your Future for Temporary SplurgesKevin Douglas
The holiday season is here! Whatever and however you celebrate, there’s one universal: spending money. Between gifts, decorations, food, and other expenses, the costs can really mount up. Of course, it’s for a good cause, and it’s only once a year. There’s no harm in splurging a little, right? There can be. Do you really need all of the things you’re buying? What are these extra expenses doing to your retirement savings?
Holiday Spending on the Rise
Last year, the average household planned to spend $882 on holiday gifts alone—not including food, decorations, etc. A hefty sum, to be sure, but let’s put it into context.
Planned spending reached an all-time high in 2001 at over a thousand dollars per household. It then hovered around the $800-900 range until 2008, when suddenly the number was cut in half.
The 2001 holiday shopping season came right on the heels of the September 11th attacks, and everyone was being encouraged to spend in order to keep America’s economy strong. Plus it just felt good to share.
In 2008, the financial crisis hit, and suddenly people didn’t have the money to splurge on gifts anymore. Since then, the numbers have been crawling slowly back up, and are back at the levels they were pre-collapse.
The problem is that the economy hasn’t actually bounced back yet to the level it was then. If another downturn comes, reminding you once again the degree to which every dollar counts, how many frivolous holiday purchases will you regret? Wouldn’t it have been wiser to save that money for a rainy day? Furthermore, how much is your retirement fund suffering each November and December because you don’t have as much to put away for the future?
There’s nothing wrong with spending a little money around the holidays and buying gifts for the ones you love. However, it’s important to be smart about it. Don’t spend more than you can afford, and always make sure you have enough to live on once the season is over. Here are a few tips for saving money over the next month or so:
- Make a Budget. Figure out ahead of time exactly how much you can afford to spend. How much goes to gifts? How much to decorations? What about food, or miscellaneous expenses? Plan carefully and don’t go over, for any reason.
- Make Instead of Buy. Do you have a creative hobby, such as painting or woodworking? Many of your close friends and family members would probably love to get something homemade from you: a piece of art or useful doodad created just for them. These can be more meaningful than ordinary purchased gifts, as well as more affordable. You might also consider making some of the decorations. For food, do things potluck style, with everyone cooking and bringing a dish, instead of you spending a fortune to provide it all yourself. As a bonus, all the dirty dishes leave with the guests!
- Beware of Sales. Holiday sales are dangerous territory. They give the illusion that you’re saving money, but in reality you often end up buying things you don’t need, just because they’re discounted. Rather than looking to see what’s on sale, make a list first of the gifts you plan on buying, then shop around to see where you can get them at the lowest cost.
Special: IRA, 401(k) & TSP Scam
These are just a few of the things you can do to curtail your holiday spending. The most important thing to remember, though, is to take that money you’ve saved and put it away. Invest it and put it towards your nest egg. It may be difficult at first to scale back your traditional Christmas plans, but in the end you’ll thank yourself. Instead of a lot of worthless bric-a-brac that will be forgotten by New Year’s, you’ll have the knowledge that your future is secure for many holidays to come.