Every year, thousands of Americans blow their budgets come December — and while they may be tempted to blame that on the dough they fork over for gifts (ahem, office Secret Santa), that explanation is only a small part of the reality.
While some of this spending is, of course, on gifts — a Nielsen survey found that Americans plan to spend 10% more on gifts this year than last and a YouGov survey noted a likely 8.7% uptick — plenty is spent on other things (many of which we don’t tend to budget for).
Overall, 10% of consumers say they plan to spend more this year than they did last year, and multicultural households account for 43% of the projected extra spending: 17% African-Americans; 13% Asian-Americans; 13% Hispanic. Additionally, fewer people plan to spend less than they did last year (21% vs. 23%, respectively). THE ECONOMIC BACKDROP LEADING INTO THE 2014 HOLIDAY SEASON
When it comes to holiday-related spending, the fastest growing areas of spending are non-gift items, says Allison Paul, vice chairman and retail sector leader at Deloitte. This year, Americans plan to spend $195 on holiday parties they throw in their own homes, up 22% from last year (vs. a 13% increase for holiday spending overall), and they plan to spend 15% more than last year on attending holiday events/socializing away from home (this might include things like new clothes for an event or buying a gift for a hostess) and decorating their homes for the holidays.
Read more on DailyWorth: http://www.dailyworth.com/posts/3137-the-cost-of-the-holidays#ixzz3LM1fuZpL
How can consumers appropriately plan and budget for these costs so they don’t start the New Year in debt?
Cash In Rewards to Pay for Gifts
Rather than popping gifts onto that interest-bearing credit card, Mint.com spokeswoman Holly Perez recommends consumers cash in rewards on credit cards or other loyalty programs to pay for gifts. “Redeeming points for merchandise or gift cards can take up to four to six weeks for delivery so now is a great time to start,” she says. Woroch adds that you can often redeem rewards for gift cards, “which make perfect presents or can be used to offset the cost of a gift” and you can also give miles as a gift or turn them into actual products like cookware or a gadget.
Perez adds that some cards are running special promotions offering extra points during this time of year. “Find out what promotions can help you maximize your rewards,”she says. “You could get some of your holiday purchases for free when you are savvy about your credit card use.” But, of course, you must make sure you pay off that balance in full and on time or these rewards likely won’t be worth it at all.
Have a Talk About Holiday Spending With Friends and Family
“There’s no shame in telling people that this year will be a lean holiday season when it comes to exchanging gifts,” says Steve Siebold, author of the book “How Rich People Think.” Perez says that when it comes to talking to family it’s important to establish spending guidelines. “Depending on the age of your children, you can touch on how much they can spend and what they can expect … maybe even give them extra chores to earn money for holiday spending,” she says. When it comes to the rest of the family, she says you should consider a Secret Santa gift swap, making charitable donations in honor of each other, a cookie swap or organizing a gift-free potluck family dinner to save money.
Woroch notes that many retailers are offering free layaway programs this year, which while certainly not for everyone (and they come with risks), “serve as good options for shoppers who are carrying a revolving balance, don’t have a credit card and simply don’t have cash to buy the gift upfront but don’t want to miss out on the deal or want to secure the gift before it sells out,” she says. She adds: “It’s a better option than relying on a high-interest credit card and you just stash your cash toward it every week until the deadline right before Christmas — for many people, this works better than simply stashing your cash into a savings account because you are actually being held accountable for it.
The holidays mean spending dough on a sleigh full of presents, but it doesn’t mean you have to slay your bank account or credit balance in the process. You know what we mean: Green as a Grinch, dollar bills fly out of your pockets as you pay and pay and pay for all the extras. To avoid the burden of overspending this season, we recommend taking a look at these seven expenditures that offer wiggle room for extra savings.
Are you competing in the neighborhood Christmas-light contest? Is your front lawn visible from space during December? Let your lights shine if that’s your thing, but be prepared for the power bill spike in January.
Every family has one. It’s the house that everyone flocks to during the holiday season. That means, at some point in December, you could have 32 people sprawled out across every room in your house. That’s 32 showers, and 32 bowls of cereal, and 32 opportunities to spill a drink on your white carpet. Make sure you budget for the visitors.
First, you’ve got all the stamps for your Christmas cards. Then, for the people you’ll actually be sending presents to, there are all of those pesky shipping costs. Don’t procrastinate, because shipping overnight isn’t cheap—or even guaranteed—during the Christmas season.
You’ve got the candy. Then there’s the $3 toy car. And the little thingamajiggy that does the little loopty-loop in the kitchen. Then there are the tiny little gift books. For your budget, stocking stuffers can be death by a thousand cuts. Keep it simple.
We’re talking about the kind you use while waiting in mall traffic, while traveling to the in-laws house, while doing the 4,000 things you’ve scheduled during the holidays. . . . Don’t forget about the gas. Maybe you’ve noticed that it isn’t cheap!
You’d be surprised at how much we spend on wrapping paper every year. Get the cheap stuff—the really cheap stuff if you can. Why spend a lot of money on something that will be ripped to shreds in less than three seconds?
Of course, there’s party food if you’re hosting a party. But if you have overnight visitors, don’t forget about snacks and all the basics like bread and milk and bagels. It’s easy to get caught up in the “main event” food like ham and turkey and dressing while forgetting about all the other little food expenses.
Hopefully, you haven’t forgotten about giving, so here’s our reminder: Don’t forget about giving to charity! Don’t let this be a hidden cost. Sit down right now and make giving a part of your Christmas budget.
The greatest way to avoid hidden costs is to plan ahead! Don’t let these items sneak up on you, and you’ll have a much less stressful Christmas—the way it’s meant to be.
While entertaining family and friends is all part of the Christmas experience, worrying about how you’re going to pay for it shouldn’t be. With our guide, you can avoid any hidden costs this Christmas.
According to the Money Advice Service’s annual Christmas spending survey, 46% of us will turn to credit cards, store cards and overdrafts to cover the cost of Christmas. While the big costs like presents and Christmas lunch are usually accounted for in your festive budget, there are other, smaller costs that we sometimes forget about.
But by considering your festive finances early on, you can put any money worries to bed.
By planning your Christmas travel well in advance, you could get cheaper deals on trains or flights. If you’ve left it too late, see if you can car share with other relatives.
A house full of relatives can be as good as a roaring fire for heating your home, so when the party is in full swing you could turn down the thermostat by a degree or two to save on heating bills. Or if you’re spending Christmas at friends, make sure you turn your heating down when away, but not off as you don’t want the pipes freezing.
For tips on how to save money and energy, read our article: Energy – Are you efficient at saving money?
3. CALLING OVERSEAS
If you’re spending Christmas day at a relative’s house, you don’t want to be ringing Australia from their home phone. See if you can use their Wifi instead for some FaceTime or a Skype call.
4. POSTAGE AND WRAPPING
Remember to check the last postage dates so you don’t have to resort to more expensive courier services to get your presents delivered on time. If you want to cut down on Christmas card costs, you could send e-cards but don’t forget about those less IT savvy or more traditional friends and relatives that still like to send and receive cards. A good way to keep the festive spirit going and to save money is to buy your wrapping paper and cards for next year in the sales.
5. CREDIT CARD CHARGES/OVERDRAFT CHARGES
As Money Advice Service pointed out, more and more of us are still putting our Christmas costs on credit cards. Make sure you budget for interest charges or overdraft fees, so you don’t get an extra surprise on January 1st.
For more advice on Christmas savings, check out our article on 5 practical ways to save money this Christmas.
6. ADDED EXTRAS
The phrase ‘batteries not included’ can make an unprepared parents’ heart sink so plan ahead and find out exactly how many batteries you need beforehand, whether you need a certain type of screwdriver to put something together and any other extras that might be needed to make your gifts usable on Christmas day.
Accidents do happen and if you’re buying expensive gifts make sure to check your home insurance policy to see if the added value is covered. If you don’t have home insurance, you might want to look into your options before the big day so you’re ready if the unexpected happens: Be ready for the unexpected.
8. MAKE YOUR DECEMBER PAY PACKET STRETCH FURTHER
Along with all these hidden costs, you’ve got a pay packet that needs to stretch an extra week. However, if you budget properly and make sure you’ve covered all the costs, there’s no reason why you can’t have a merry Christmas on a budget that works for you.
Carl Gould is a business strategist, and growth expert. He has written 5 books in the area of creating business success, and is the co-host of the weekly radio program, ‘Quit and Get Rich’ (www.gteamradio.com). Carl and his team of experts advise companies and organizations to grow to the next level. What is the next level for you?