Preventing Holiday Overspending

Preventing Holiday Overspending

It’s no surprise that the busiest shopping day of 2012 was Black Friday, the day following Thanksgiving. This year, though, Thanksgiving Thursday will likely be in the running for one of the busiest shopping days of the year, as many retailers plan on being open at some point on that day.

According to a preliminary Thanksgiving weekend shopping survey by the National Retail Federation, up to 140 million people plan to shop over the upcoming holiday weekend (Thursday, Friday, Saturday and Sunday). For the first time, the NRF asked if people plan to shop on Thanksgiving Day, and nearly one-quarter (23.5% or 33 million) said they do.

If you plan to start your holiday shopping soon, having a plan ahead of time can help you prevent overspending. Start with a total you can afford to spend, a list of people you would like to give gifts and a dollar limit for each person. Don’t forget service people like the mailman, dog groomer, hair dresser, lawn service and maid service. Also factor in any gifts that your children or your spouse need to give, including teachers and administrative assistants.

Total your planned expenses. If your total is higher than what you planned, you should either drop some people or drop some amounts until you get within your budget. Be sure to take a list with you while shopping and update it frequently, so you don’t forget what you’ve already purchased. If you’ve had problems with overspending before, consider putting your total cash in an envelope and using only that cash for gifts. Or, set aside a credit card specifically for gift purchases and check your total online frequently.

When it comes to the children, grandchildren, nieces and nephews, consider whether they will be getting gifts from multiple sets of grandparents, aunts and uncles. A few people buying multiple presents for one child can quickly become an explosion of overspending. Consider setting a family limit, either dollar amount or number of gifts.

Having a goal and a plan for achieving it applies to many areas of your finances, from holiday spending to college funding and retirement planning.  Call your financial advisor for assistance when you need to create or update a plan for achieving a financial goal.

FINANCIAL FACTS

Buying Power – Inflation has increased the level of prices in the U.S. 61.5 percent over the past 20 years, an annual increase of 2.43 percent. Thus, an individual retiring on Aug. 31, 1993, on a fixed-income (i.e., with no cost-of-living adjustment) would have 62 percent of the purchasing power as of Aug. 31, 2013, that he or she originally had (source: Department of Labor, BTN Research).

What Shutdown? – The government will pay $2.5 billion to the federal employees that were furloughed for 16 days in early October 2013 in the form of back-pay and benefits (source: Office of Management and Budget, BTN Research). 

Shop – Retail sales totaled $426 billion in September 2013, a 3.2 percent increase over the total from September 2012. The $426 billion in retail sales is the second highest monthly total ever (source: Commerce Department, BTN Research).