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Another Black Friday/Cyber Monday has come and gone. Americans spent a record $5 billion on Friday alone! Shops are happy. Bags are full. Wallets are emptier. It’s the holiday season! A spending cycle that repeats year after year…after year. Holiday spending is a tradition, right? There’s practically a deal on everything at this time. That makes it completely worth it! …Right? This is when you’re supposed to spend money! Honestly, I don’t completely disagree. But once again, it all depends. Of course it’s fine to purchase gifts for friends and families. Of course it’s alright to travel for the holidays.
Some people have more money than others. Looking at you Mr. Jeff Bezos (who’s net worth recently topped $100 billion!) He could buy all his friends and family members a nice car, have each vehicle wrapped in gold wrapping paper, and do overnight shipping with Fedex for all of them. And it wouldn’t make a dent in his wallet. But for most of us, that’s not the case (if this is the case for you, I’d love to hear why you’re reading this blog!). Some may not agree, but even during the holidays, there should be restrictions. But there should also be more freedom, since there are things that are worth more than money. So what’s the balance?
If you’re like me, you can become hypnotized by deals. Those 50% off sticker tags can draw my attention from a mile away. Stores know this. Amazon knows this. And they know that November – December of each year is peak holiday spending season. They will jump on any opportunity they can to sell stuff to you. And the scary thing is – they may know you better than you know yourself. It’s crazy how much social media, stores, websites know about you. Entire profiles can be built around you based on your browsing habits. Have you ever looked at a targeted ad and wondered how they knew you needed that item?
So why does this season even exist? Did you know that the first documented Christmas tree was in 1747? I dug deep into a rabbit hole trying to uncover when Christmas first became commercialized. It’s a fascinating read understanding why we perceive it as commercialized today and what people thought in the past. What I do know is that we are spending more than ever today.
I’ve mentioned in a previous article that Americans have spent an average of $850/yr on Christmas gifts alone. This doesn’t include travel or anything else. It’s because we know we’re supposed to give gifts during this time. Knowing that others are expecting gifts at this time. And sometimes that causes us to overextend our wallets.
Know Thy Enemy
Battles are won when one side studies their enemy and knows what to expect. Likewise, before stepping out into the minefield of sales, you want to be aware of what’s going on. As I’ve mentioned before, retailers have lots of tricks up their sleeves to get you to spend money. Here are some things to watch out for.
- Markups. That jacket that you wanted to buy for $50 yesterday is now 50% off! It’s $45 now! But wait, how does that make any sense? Oh, they raised the price to $90 first. It’s really only 10% off from the price you saw yesterday. Psychologically we are driven to deals. But we can be distracted from the true amount of savings. You can protect yourself from this by comparing item prices. It’s 2017! You have the ability to check items across multiple source online. If you’re on Amazon, you can utilize historic price checkers. I like to use this site (you literally plug in the webpage URL of the item you’re purchasing and it gives you a graph of its price history.)
- Free Shipping. Free sounds great. But free can sometimes come at a cost. Free shipping is one of many tricks that online stores use to influence your spending. Similar to a sale, once you see that “Free Shipping” banner at the top, you feel like you’re getting a bargain on whatever you purchase. Unfortunately, a lot of free shipping offers come with a minimum spend as well. So really, you’re getting baited into spending more in order to hit the free shipping threshold.
- Coupons. Once again, just because something is now cheaper, doesn’t mean you need to get it. Coupons can actually trick you into buying something that you would’ve never considered buying before. A lot of coupons are future-dated. You’ll feel the need to come back to the store and buy more things to maximize the savings. If you already know you need to buy something, you can take advantage of this. But if you didn’t need anything else, don’t use this as an excuse to purchase more!
- Bundled Purchases. Don’t walk into a store looking to buy a TV and walk out with an entertainment room. Stores know what items go well together. Like peanut butter and jelly. But if you only need peanut butter, don’t get the jelly! Amazon is really good at this as well. For every item that’s displayed, it always shows a list of other things that “are also purchased” with the one you chose. Don’t fall for it!
- False Advertising. Be especially wary of Black Friday/Cyber Monday deals. There are plenty of deals throughout the year that rival or are better than some of the deals offered during these two major sale dates. Over the years, stores have increasingly been using these days to get rid of inventory, rather than having worthy deals. The marketing is strong. But do proper research before jumping on the hype train.
Know Thy Self
While being aware of sales tactics is useful, it’s equally important to know your own limits when it comes to spending this holiday season. Here are just a few ways to prepare yourself for holiday spending:
- Know Your Guidelines. If you have nowhere to start, start here. The recommended rule of thumb for gifts is 1.5% of your total income. And that recommendation is for gifts the entire year. If you’re making $50,000/yr, you’re looking at a total gift budget of $750. Knowing your high level budget for gifts will certainly help you divvy it up properly when it comes to Christmas gifts.
- Plan Ahead. It’s not rocket science, but it can save your finances from blowing up. The worst time to go grocery shopping is when you’re hungry and don’t have a list. You pretty much get everything there is. A few days later you’re throwing away all the food you bought that you couldn’t finish. Have a list of people you want to buy gifts for. Have an estimated budget for each person. And then stick with it.
- Use Cash. If you really know you can’t control your spending, use cash. If you read my blogs, you know that I am pro-credit cards. But, if holiday season is your kryptonite, you’ll have to give up those juicy reward points. Besides, getting rewards is not the reason that you should be spending, just an added bonus in case you needed to get something anyway.
- Research. As you may know from my previous article about frugal vs cheap, the best deals aren’t necessarily the cheapest. Identify items that you want that will be best the value to you. The cheapest things may cost more in the long run. Stores are sometimes trying to get rid of their cheapest items during these holidays!
- Don’t Buy What You Don’t Need. There’s actually an even easier way to save that’s available. In fact, it’s foolproof if you follow through with it. If you can’t afford to buy something, don’t buy it! I know. It’s intuitive. But really, it can be difficult to remember that when you’re blinded by the red sales tags floating around you. There are people that will literally buy an item because of how much they were able to save. Here’s the deal: saving 25% is less than not buying at all. You’re saving 100% there!
A Balancing Act
But…what if I have a bunch of friends? And I’ve been giving them each a gift every year? Am I supposed to just tell them I can’t afford to get them gifts anymore? It can definitely be tough. No one wants to be that person who won’t give a gift because they want to save money. There’s a certain “cheapness” that gets associated with that type of behavior, sometimes unfairly. Luckily, guidelines are guidelines. If you value gifts over other things, then it’d be smart to re-allocate other items in your overall budget towards your gift-giving. But I do personally think it’s incredibly silly going into debt over Christmas gifts.
Regardless, I think the earlier you set your expectations the better. There are people who have told me they couldn’t give me a gift this year due to financial constraints. But that they totally would if they could. Does this make me upset? No way! And it may be scary bringing it up at first. But you should never feel like you’re putting yourself into a negative financial situation for the sake of appeasing someone else for their annual gift.
Generously Spending or Spending Generously?
Are you spending just to spend? Or are you spending to give? For some people, it’s a time to spend as much money as possible to capture all the deals. For others, their spending is tied to their giving. In either case, it’s still important to know your personal finance and have a plan before diving into holiday spending.
That being said, I am a firm believer of generosity. If you have more than others, this is an amazing time to show your appreciation for friends/family. I personally try to spend very little on myself during the holiday season in order to maximize what I am able to give to others. There’s nothing more rewarding than being able to give back. Friends, family, even strangers that may not have the blessings that you do. In such a commercialized season of spending, it’s refreshing that the holidays are also associated with generosity and giving.
As a personal finance blogger, it can seem weird to say this, but there are definitely occasions that transcend monetary value. And it really is a case-by-case basis. Maybe it’s the last time you’ll be able to see this person and a plane ticket is out of your budget. Or a special someone is meeting you for the first time and you want a nicer gift that you can’t necessarily afford. Some may argue that it’s still no excuse. And it’s definitely better if things are planned out beforehand. But get that plane ticket. Buy that gift. Money can be earned back. Don’t lose sight of the most important things just to save a few dollars, or just to listen to a random stranger’s online advice!
Good Luck Shopping!
And good luck to all of you this holiday spending season! It’s a hectic time for sure. But planning it out will save you time and money. Also, being smart with how you use your money now will set the tone going into the New Year (can’t believe it’s almost here!)
What do you think? Any other tips/tricks you use to get through the holiday spending season? Would you rather not spend money at all? Do you believe in giving a pass to certain situations because of the holiday season?
I’d love to hear all your thoughts/comments! Happy holidays to you all 🙂