By Christina Williams – Junior Achievement of the Eastern Shore
“Only charge what you can afford.”
It sounds simple, doesn’t it? But the hopeful wish lists from your children, your handful of nieces and nephews, the desire to not leave out anyone in your secondary list of family, friends, co-workers, and dedicated service people all demand fulfillment in your head. Toss in the carefully crafted joyous atmosphere provided by stores and your own tinsel-enhanced holiday spirit, and it becomes easy to overlook the reality of your finances and overspend during the season of giving. To help you combat this pitfall, JAES gives you our own present, the four B’s of holiday spending:
BUDGET. Set a spending limit. Practicalmoneyskills.com advises to avoid spending more than 1.5 percent of your household annual income on holiday gifts and entertainment. Pay in cash, if you can. Using only the money that is in your bank account will wipe out the possibility of going into debt over the holiday season. Going a step further, pay in cash. The physical act of removing handfuls of green from your wallet is much more impactful than swiping a debit card (out of sight, out of mind).
If you don’t have the cash on hand all at once, and mastering the discipline required to set aside monthly amounts on your own proves difficult for you, many stores have re-instated their layaway programs. And if you have access to a credit union, most still participate in Christmas Clubs, which are special short-term savings accounts to encourage holiday nest-egg building. If you must use credit, keep your budget firm. Use rewards points if possible. And be certain of your interest rates. Too high? Call your financial institution and ask about lowering them. If your credit is good and you have low debt, opening a new credit card with a special, money saving promotion is a consideration. However, be careful with opening new cards or driving up limits, as this can damage your credit rating.
BALANCE: Keep track of your spending. If using a credit card or checking account, check your balance online or by phone. If using cash, know what’s in your wallet and how much of your budget you have spent with each purchase. When you come close to reaching that number, stop and reevaluate your buying list.
BE REASONABLE
Not everyone needs a gift. A card or a simple, “Happy holidays,” will sometimes suffice. Yes, it’s difficult to go through the lists of people in your life and decide who will receive something and who won’t. However, those who care for you will not want you to amass debt so they can have the latest gadget or article of clothing. Consider baked goods or other handmade gifts. Offer your services. Anyone who has struggled with rollers and cutting in will know a weekend painting your best friend’s living room is an amazing gift. If you must give something physical and store-bought, consider rescheduling. It sounds strange to put off the holidays, but stores have massive post-holiday sales. Take advantage, save a considerable amount of cash, and extend the season while you’re at it.
BUY (WISELY)
Some sources say it is wiser to shop online first. Comparing prices and items is easier than driving to ten different stores. Also, buying online makes it harder to go through with those impulse buys. The Internet is also a wonderful provider of spoilers; not good when waiting to watch your favorite show, but very handy when you want to know the upcoming Black Friday Sales. Comparison shop online and in stores. Consider the value of what you are purchasing. Is it a fad item the kids will be “over” in another month or is it a relatively long-term investment? Is the item well made? Is the price fair compared to its quality and function? Get your mileage out of your purchases-out of your money.
Going on a spending spree that you cannot afford may give you fleeting holiday joy, but paying on average $195 in interest over the next four years is sure to give you and your wallet the post-holiday blues.
“Christina Williams is the marketing and P.R. director at Junior Achievement of the Eastern Shore, a 501(3)c nonprofit dedicated to teaching age-appropriate financial literacy, workforce readiness, and entrepreneurship to over 6,000 local K-12 students annually. Through enthusiastic volunteers and charitable donations from individuals and businesses, Junior Achievement of the Eastern Shore continues its mission to making a difference in our future communities today. www.easternshoreja.org.”
