It’s safe to say that this year has been a wild ride and there’s a good chance that your finances have taken a hit as a result of the coronavirus pandemic and all that’s followed.
With the holidays just around the corner, this can be an extra stressful time financially with the added pressure of gift giving and various other holiday-related expenses. Brittney Castro, a CFP at Mint, suggests taking some time to evaluate your current financial life and how you’re going to navigate the holidays.
“For better or worse, this year has created a lot of change in people’s financial lives.” says Castro.
To help guide you through this, we’ve gathered a list of helpful tips for navigating the holidays if you’ve taken a financial hit.
Set a budget, stick to it
This might seem like an obvious step, but a surprising number of people don’t create a holiday-specific shopping budget, says Jaspreet Chawla, SVP of savings products at Navy Federal Credit Union and a big proponent of having a dedicated holiday spending account.
By having a dedicated spend account, you’ll likely have a clearer view of your spending — helping to keep your budget in check.
“When you make and write out a budget, you’re much less likely to get distracted by holiday sales and overspend,” says Chawla. “Once you decide how much you can spend overall, break down your budget by how much you intend to spend per person. Getting even more specific with your intentions can help you stay on track.”
Make a plan as a family
It’s never fun cutting back, but it’s often a necessary step to take when rebuilding your finances after taking a hit. But in order to be successful in this, everyone should be on the same page.
That’s why Greg Klingler, a CFP and director at the Government Employees’ Benefit Association (GEBA) in Fort Meade, Md., suggests that families make a plan before the season begins.
Some potential strategies to include in the plan are: drawing names as a family vs. buying gifts for everyone; setting a family spending limit; and creating a spreadsheet to identify where you could overspend this season.
Other expenses exist
It’s not only the gifts themselves that you have to worry about, but there’s a whole slew of other expenses that can put your budget over the edge if not taken into consideration, says Klingler.
Some common non-gift expenses to factor in include: gift wrap/gift bags; Christmas cards; and travel costs to visit family.
Can you afford it?
Regardless of the season, a good rule to follow is to never spend more than you can afford — especially when it comes to non-necessary items like gifts.
“If you can’t afford it outright, you can’t afford it. Don’t risk incurring debt to pay it off,” says Klingler.
Putting gifts on layaway can be tempting, but Klingler warns that the interest rates on debts like this can be very high. Another tempting option may be to use Afterpay, a payment service that allows you to buy now and pay later via installment payments. However, this method could easily lead you down a slippery slope of debt.
Loyalty might pay off
Between credit cards and store loyalty programs, you could save big just by leveraging what’s already in your wallet.
Credit cards, for example, can help you earn cash back on your purchases or allocate earned rewards towards your shopping, which isn’t typically recommended but can make sense in some cases.
Additionally, if you do a lot of your shopping at a specific store, make sure you’re enrolled in their loyalty program so you can get rewarded for your spending and maybe even get a discount or two. These are usually free to join and should only require information like your name, phone number and email — no credit card or other payment information.
Make something nice?
If you’ve fallen on hard times financially, the thought of giving gifts this year can be stressful. But not all gifts have to be fancy and new — you can make something yourself or pass something down. These types of gifts can end up being among the most memorable.
“People appreciate you putting in the effort to make something handmade,” says Chawla. “The holidays are less about spending money and more about spending time with the people you love and showing them you care.”