Budgeting for the Holidays

I type this blog on a “black Friday” afternoon, far from the throngs of Christmas shoppers looking for the next bargain. I did briefly participate in the traditional busiest shopping day of the year this morning, twice in fact, both online and in a store. I’ll admit it, I was lured onto the website and into a store by a seemingly unbelievable low price. But when I read the actual specifications for the items I was interested in, a dishwasher and TV in this particular case, the products didn’t meet my needs.  I wonder how many shoppers would have gone ahead and made the purchase only to experience regret a few months later?

My experience this morning reinforced my belief in the “free lunch” pitfall that is black Friday. As I drove home, I passed shopping centers with no parking spaces apparently available. Why is black Friday the shopping event of the year? Probably the larger question is how do most people budget for the holidays? Or for that matter how do people budget at all nowadays?

In my upcoming book Being Frugal, I’ll explore ideas on how to successfully budget and save in all aspects of daily life. For the purpose of this five-minute read, I’ll just stick to three methods I’ve used to budget for Christmas. As a matter of fact, we’ve already covered the first one!

Use caution on black Friday. Most people understand that black Friday is named for the day of the year when many, if not most, retailers move into the “black” and become profitable for the year. In reality, black Friday is simply an advertising tactic to lure consumers into stores with the promise of finding a great deal. Most often the results of the biggest retail day of the year are overspending on sometimes lesser quality goods. In my opinion the only people who win on black Friday are the retailers!

This is not to suggest one should never look through the black Friday or cyber-Monday ads, I did so myself today, but do so with extreme caution. That is probably not the TV you are looking for! Using my story from today, if I’d impulsively went ahead and bought the two “great deals”, I’d currently be out about $1500 bucks and probably unhappy with my purchase in a matter of months.

Make gift giving special again. It seems like in today’s instant gratification world, Christmas gift giving is almost a duty rather than a very special occasion. Many families give into their kids wants year-round, so when Christmas rolls around, there is very little to look forward to. Growing up, my parents did not give into most of my childish frivolous desires throughout the year. While some of this was out of constraints on financial resources, it was mostly my parents’ good financial discipline. A byproduct of this approach was that my Christmas mornings were incredibly special. In fact, I used to get so excited on Christmas eve, I couldn’t even sleep!

The bottom line is budgeting for Christmas is a year-round effort not just a November thing. If making a purchase for a toy or gift in April, better deduct that from the Christmas budget! We applied this rule as best we could with our kids as they grew up. Our kids were fiends for Legos and wanted the newest set all the time, but we would typically make them wait till Christmas. Of course, this strategy may mean spending a bigger chunk in November or December, but I think most would agree the money saved by not giving into frivolous wants year-round, saves money in the long run.

Make gifts “needs” rather than “wants” as much as possible. If you’ve read any of my personal finance material, you know a key theme is spending on the needs and skipping on the wants as much as possible. Christmas is no different. While new clothes and books may be a child’s most dreaded gifts, someday, they will appreciate the financial wisdom of their parents. Perhaps a better example is a laptop or tablet, hard to live without these days and definitely could be classified as a need.

That being said, life is not a dressed rehearsal. If there is money in the budget, Christmas is the time of year to give into some of those wants and purchase that piece of jewelry for the spouse or toy the kid’s been wanting. Maybe they’ll never wear the jewelry again and the toy will find its way to the bottom of the toy box by February, but sometimes you just have to make a memory. The look of surprise and gratitude on Christmas morning is often priceless.

Many people in the United States do the bulk of their spending around the holidays and rightfully so. Christmas is a celebration to match no other! Unfortunately, in our rental business we’ve seen tenants who overstretch during the holidays and have a hard time covering rent in January and February. This happens all too often in America. The takeaway this week, most simply put, is to develop a financial plan for the holidays early in the year, not in November. No matter what techniques are used, without a budget, the holidays can go from happiest time of the year to financial disaster very quickly.

If looking for that last minute gift, what better than one of my self-help books?

Interested in rental property investing? Look for “Collect Rent, Don’t Pay It: A Beginner’s Guide to Rental Property Investing” on Amazon to learn how our family turned rental property investing into a successful side hustle!

Looking for a good how-to on wealth building? Check out my book, Millionaire on a Worker’s Budget: Five Financial Truth’s to Build Wealth on sale now at Amazon!

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