Cut The Guilt From Holiday Shopping: A Better Approach

Each holiday season, tips relating to holiday shopping flood the internet. Personal finance-related media coverage tends to focus on either budgeting or the amount of consumer credit card debt come January.

What Personal Finance Gets Wrong About Holiday Shopping

“Budgeting” advice nearly universally focuses on how to save money here and there, and harps on not going into credit card debt, such as this article by CNBC . Approached from this angle, the assumption is that you are spending too much. Unsurprisingly, the vast majority of Americans prefer the “Ostrich approach” (e.g. sticking their heads in the sand until January) rather than doing any proactive planning. The numbers support this. According to a recent Forbes.com poll , 58% of Americans expect to accumulate credit card debt just to finance Thanksgiving, not including any holiday gifting.

While well‑intentioned (I don’t want you going into credit card debt either), I think harping on budgeting in the traditional sense (e.g. reducing costs) is an ineffective way to approach the topic. Or at least, it isn’t particularly helpful for most consumers, as evidenced by the same Forbes.com poll which clearly shows that, despite knowing that expenses would increase substantially for holiday purchases, 61% of respondents have no plan for paying for the increased costs.

It's no surprise that consumers reflexively ignore the issue. Traditional personal finance advice is austere, harping on frugality and saving rather than using money as a positive tool to enhance your life, and yes, also bring about lifelong financial security. Having grown up with very little money and experiencing first-hand how restrictive that is, I have learned to appreciate the comforts and experiences that money can provide. Over time, I’ve developed into a proponent of balancing both diligent long‑term saving with ongoing enjoyment. I am also a stickler for knowing your numbers, even if you don’t like what you see.

A Better Way to Approach Holiday Spending

A better way to approach holiday spending is to understand how much you want to spend during the holidays and then plan proactively for it. Removing guilt from holiday spending and replacing it with intentionality and excitement.

In order to arrive at a place of intentionality, you need to be honest with yourself about what you spend this season. As it is with all things personal finance, when you shine a light in a dark corner, it becomes less scary.

If you haven’t already this holiday season, make a list of all the people in your life that you want to buy gifts for, and what amount you expect to spend on them, or have already spent on them. I don’t care where you create this list – pen and paper, computer, your phone’s notes app – wherever is most convenient for you. I prefer Excel because it does the math for me. I do this outside of the app that I use for monitoring all of my financial accounts because there is power in the forward-looking exercise of first projecting what I expect to spend and then comparing that to what I actually spend. Surprise, surprise, I always spend more than I think I will.

Don’t forget to add in a line item for personal shopping, too. The latest Shopify-Gallup Holiday Shopper Pulse found that the majority of people planned to buy items for themselves or their household during Black Friday and Cyber Monday sales, and nearly 30% of those were preparing to buy a big-ticket item costing $500 or more. And finally, add in an additional 15% to account for things/people you inevitably forgot (like your annual office white elephant gift exchange).

If applicable, holiday tips should also be tallied and included – tips to your housekeeper, building staff, your children’s daycare providers or teachers, etc. And finally, allot a budget for hosting holiday dinners and get-togethers, if you are hosting.

Without judgement, notice the total amount. This is the minimum amount that you can expect to spend this holiday season. If you are on a tight budget, you now have three pieces of information – how much you would ideally want to spend, a starting place from which to start cutting back if you need to reduce that number, and a target gift amount for each recipient on your list.

As you continue through the holiday season, keep track of what you actually spend on each person (and yourself), and add anyone you may have forgotten to your list. Even if you forget to add some items here or there, you will have a much better idea of how much you tend to spend during the holidays, and can plan effectively going forward. As an extra bonus, you’ll have a list from which to start your holiday planning next year.

Plan Ahead for Next Year’s Holiday Season

I love the holiday season, and my own spending predictably spikes in November and December each year. Realizing this, years ago I set up ways to pay myself an extra Christmas bonus to help with cash flow. Once you have a better idea of your extra holiday spending, here are some tricks you can deploy throughout the year to plan ahead for a truly guilt-free and intentional holiday season next year.

• Sub-savings accounts – Set up a monthly or bi-monthly automatic transfer to a high-yield sub-savings account that you then withdraw each November. If you don’t already have a high-yield savings account, here are some great options . Setting aside even an extra $50 per month throughout the year will result in your own personal (and tax-free) Christmas bonus of $600, and you likely won’t miss that $50 each month. Give your sub-savings account a cute nickname, like “Christmas Bonus” or “Holiday Shopping”.
• Over-contribute to your 401k – If you are maxing out your employer-sponsored retirement account, consider increasing your contribution to max out before the end of the year, giving your last 1-2 paychecks a nice little bump.
• FSA Funds – If you have an FSA, either medical or dependent care, pay out of pocket up front and defer claiming those funds until December. If the account is a medical FSA, be sure to save your receipts throughout the year.

As the saying goes, knowledge is power. By bringing mindfulness to the season and just a little extra effort, you can transform guilt around holiday shopping into enjoyment. Alternatively, you may see your numbers and decide to make changes to how you approach holiday shopping altogether to better reflect your values. Either way, you’re in control, which is exactly where you want to be when it comes to your money.

By Natalie Colley, Contributor