‘Tis the Season for Gift Giving, Not Budget Busting

The trick with holiday shopping is to let everyone know just how much they mean to you without going into debt and sabotaging your financial future. Surveys show that folks who take on debt during the holiday season generally take on a substantial amount, nearly $1,000. In addition to gifts, this average takes into account the cost of entertaining and travel.

It’s easy to get carried away. After all, you rationalize, everybody is doing it. Retailers lure us with terrific deals and promotions and our 20161212-itsawonderfullifeconversations with family, friends and colleagues revolve around shopping and holiday preparations. The National Retail Foundation’s (NRF) annual Thanksgiving weekend survey conducted by Prosper Insights found that 44 percent of Americans shopped online and 40 percent shopped in-stores. This holiday season, defined as November and December, NRF estimates that holiday sales will increase 3.7 percent, to $630.5 billion, compared to last year’s 4.1 percent growth. The average increase in holiday sales for the past 10 years is 2.5 percent.

In her article 6 Money Lessons To Remember In December That Will Keep You Financially Healthy In January, Maya Kachroo-Levine makes the excellent point that a “financially healthy new year can’t start on January 1, 2017.” She writes, “If you want to start your 2017 off with a clean financial slate, then planning for that needs to start now.”

I agree with her #1 rule: Only take on credit card debt that you can pay back by the next cycle. That means setting a realistic budget and keeping track of your spending. Your family and friends do not want you to be in debt come January. How can you avoid overspending? Agree to a price limit with family members, decide that everyone will exchange something handmade, or choose to spend time together instead of exchanging gifts. Large families can consider drawing names or a Yankee Swap so each person has to buy just one gift. Ask anyone about their most memorable gift and I bet it was a gift from the heart.

The holidays should be about spending time together with loved ones, having fun, and creating special memories, not making another mad dash to the mall. If you have young children, now is the time to plant the seeds that the holidays do not demand expensive presents and extravagant celebrations. In fact, why not choose a worthy charity to support together and make a financial contribution and/or volunteer your time?

All of us at Bernhardt Wealth Management wish you a Happy Holiday Season! And while you are enjoying the company of family and friends and creating cherished memories, keep in mind that December 31st is the deadline to max out on your annual 401(k) contribution.

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