With the holiday season upon us, it is important to plan out our spending to both be sure that those who are important to us receive a gift and that we do not severely overspend this season. While gifts and celebrating the season are important, it is also important to be sure that our holiday spending does not put us in a financial hole to start the new year.
Set a Holiday Budget
A great first step is to set a budget for the holiday season. This should include expenditures such as:
- Holiday gifts
- Meals and parties
There may be others or variations of these categories, but, in total, the amount spent during the holiday season can add up quickly. It is a good idea to establish a budget, starting with a list of your anticipated expenses during the holiday season. Putting it all together in a single place can be a real eye opener in some cases.
Look at Your Overall Year-End Financial Priorities
Take your holiday spending budget and look at it in the context of your overall year-end financial priorities. These might include things like:
- Fully funding your retirement plan and other investing priorities
- Ensuring you have sufficient cash to cover your tax liability early next year
- Paying off debt
- A family vacation
- Meeting ongoing obligations
If your holiday budget fits into your overall spending priorities for the last part of the year, that is great. If your preliminary holiday budget will put you into a financial hole to start the new year, it might be time to relook at your holiday spending with an eye toward scaling back.
It is always important to set spending priorities; this is definitely the case for the upcoming holiday season. Celebrating with family and friends is important. Buying gifts for friends and family is also important. However, so is staying within your financial means.
In the case of gifting, be sure to determine who are your priority people for gifting. This might be immediate family and some close friends. It is wonderful to let these important people in your life know you are thinking of them and a gift can help do this. However, gifts do not have to be excessive in price. As the old saying goes, ‘it’s the thought that counts’!
Review Your Gifting List
It makes sense to review your gifting list periodically to determine who you want to buy for and what types of gifts to buy. For close family, maybe you spend a bit more, especially with children or grandchildren. With friends or others, maybe a gift exchange where you pick a name. Perhaps if you are a baker, you could send a dessert item to them. Perhaps just a card or phone call to let them know you are thinking of them and that the relationship with them is important.
Shop for Bargains
Sales and bargains are a good thing. When you shop for gifts, be sure to look for sales on items you are planning to buy. With online shopping and other avenues, finding what you are looking for at a lower price may be possible.
Depending upon the type of gift item that you are looking for, you may be able to find a similar item of similar quality at a lower price in some cases.
The holiday season is often a time to reconnect with family members and friends you may not have seen a lot of during the year. Make the most of the season and get together with these folks. Maybe a lunch gathering around looking at the holiday decorations in your town.
Perhaps you might consider hosting a gathering at your home, or perhaps there is a charitable cause you could unite on to help support. Maybe this is a food or clothing drive in your area. Nothing reflects the spirit of giving and the holidays like helping those in need. Providing this help with close family or friends may be a bigger gift than anything you could buy them. What is better than helping others and providing that help with those who are close to you?
Common Sense and Restraint
The holidays are time to celebrate and connect with family and friends. It is also a time to help others and be thankful for what you have.
Celebrating with gifts for others and gatherings is wonderful, but there is no need to get carried away. Look at ways to keep spending in check while still enjoying the season. You will be much happier in the new year if you show some restraint in your holiday spending.
Need help aligning your year-end financial priorities with your holiday spending budget? Contact your Wedbush financial advisor for some ideas.
Wedbush Securities does not provide tax or legal advice. Please consult your tax or legal advisor.
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