By Danielle Donham
University of Kentucky
For many, the holidays are often a time spent with loved ones, your favorite homemade meals and gifts. But, vacations can also be a stressful financial time if left unprepared. So what can you do to save money this holiday season, and how can you easily manage your shopping list?
To help vacation buyers prepare, UKNow enlisted the expertise of Nichole Huff, Ph.D., assistant professor in the Department of Family Sciences and extension specialist for family finance and resource management with the popularization of family and consumer sciences at the College of Agriculture, University of Kentucky. , Food and Environment.
Huff’s work centers on improving the financial and mental well-being of individuals and families in and beyond the Commonwealth.
In the questions and answers below, find out how to prepare and financially plan for the craziest shopping season of all.
UK: When should people start financially preparing for these holiday shopping? Should you buy over several months to spread the load or wait for sales towards the end of the year?
To blow: The sooner someone can prepare financially for the vacation, the better their budgets will fare. It’s important to save throughout the year for anticipated holiday spending, and this year in particular, consumers may want to shop even earlier to avoid possible product shortages and price hikes. . Economic forecasters predict this holiday season can be especially difficult for stores to restock shelves once they run out of an item. Additionally, online retailers are at the mercy of postal and parcel services, which means customers may take longer to receive orders online. If you have specific gifts on your holiday gift list, waiting for year-end sales may be a bigger risk this year considering low inventory and shipping delays.
UK: We are still in a pandemic, combined with labor shortages and rising prices. Do you anticipate a change in what the average person spends on holiday gifts?
To blow: Yes, vacation spending is expected to return to pre-pandemic highs this year. This does not necessarily mean that consumers will buy more; it means that what they buy will cost them more. The National Retail Federation estimates that consumers will spend an average of $ 1,000 on themselves and their families on vacation expenses this year. The pandemic has contributed to manufacturing shortages, supply chain bottlenecks, shipping delays, and price increases and higher prices for consumer goods and services. From food to gasoline to gifts, holiday shoppers and travelers should expect to feel the financial toll of the pandemic this holiday season.
UK: What are some common mistakes people can make when giving gifts this time of year, financially?
To blow: A common financial mistake people make while on vacation is spending beyond their means. Whether you’re getting ready for a holiday reunion, traveling to visit family and friends, or shopping for gifts for loved ones, it can be easy to go over budget. We may feel pressured to show affection through giveaways or to follow social trends that we cannot afford. Instead, consider ways to stick to your vacation budget out of the (gift) box. Consider your time, talents and resources and create a gift from the heart. Remember that old “cranky” adage that the holidays are more than what comes from a store. It is okay to cut back during the holidays. Never go into debt for a gift or a holiday celebration.
UK: What sparked your interest in financial wellness?
To blow: As a graduate financial educator in family therapy, my work lies at the intersection of mental health and financial health. When our finances and resources are strained, stress can negatively impact our physical and mental well-being and our relationships with others. Having worked in crisis intervention, I quickly discovered that I was a prevention professional at heart. If I could educate and equip people with the tools and skills to be more resilient, they could improve their ability to bounce back from adversity. That’s what I love about Cooperative Extension – it provides people and communities with the knowledge and resources to be healthier and more successful in many areas of human and economic development.
UK: Are financial well-being and financial resilience more important than ever, given the times we live in?
To blow: Times of recession – even global pandemics – are not new historical events. If you ask your parents or grandparents, they will probably remember going through an economic downturn. However, during these seasons, it is especially important for consumers to build their financial resilience and well-being. According to the Consumer Financial Protection Bureau, financial well-being is the time when “a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow them to benefit. of life”. When commodities are scarce and money is limited, learning ways to better manage your resources – from household items to paychecks – is imperative to strengthening your current and potential financial health.
UK: Do you have any tips for creating a budget and, most importantly, sticking to it? Any recommendations for students in particular?
To blow: When creating a budget that you stick to, my advice is to keep it simple. Basically, a budget is a list of your income versus your expenses. When expenses exceed income, debt often follows. However, when income exceeds expenses, you generate savings opportunities. The key to budgeting is to record all of your actual and planned purchases for the year, from daily transactions to monthly bills to annual expenses. To make your money work for you, allocate a job for every dollar. If you’re in the red, look for “expense leaks” to fix. Leaked expenses are small, recurring or unnecessary purchases that accumulate over time. These leaks can drain your budget if you are not intentional in your spending. Track your purchases each month and adjust your budget if necessary. The goal is to spend less than what you earn so that you can start saving and investing.
UK: Is it smarter to use credit / debit or cash for holiday shopping? Are there any advantages to one over the other?
To blow: Generally speaking, every time we pay cash (or use a debit card) for a purchase, it costs us less in the long run. When we pay for something on credit, we are essentially financing the purchase. If we do not pay off the monthly balance in full, we will pay interest on any remaining amount. The decision to use cash or credit depends on your financial situation. Using cash can be a useful payment strategy to stay on budget. It also reduces the risk of identity theft. If you choose to pay with a debit card, be sure to regularly monitor your account balance and transaction history. Fraud protection for debit card purchases requires consumers to promptly report fraudulent activity to their financial institution. If you shop frequently online, using a credit card for purchases can provide an additional level of security, but only if you use credit responsibly and can afford the balance.
UK: The biggest tip or tip for reducing financial stress?
To blow: Because finances are so integral to our livelihoods, they can naturally cause us stress. This is especially true when we incur an unforeseen expense, experience an unforeseen event in life, or when our income does not go as far as we need it to. To reduce financial stress, we can do one of two things: reduce our expenses or increase our income. The latter is often more difficult, so start by looking for ways to cut unnecessary expenses. Cancel unused subscriptions, such as monthly streaming services. Switch to generic brands of food, toiletries and housewares to save on grocery bills. Talk to your creditors about ways to lower interest rates on credit cards or loan payments, or move billing dates to a time that works best on your payroll schedule. Declutter your house and organize a garage sale. Financial strains are not eased overnight, but their weight can decrease over time through intentionality.
UK: How can people adopt healthy spending habits throughout the year to be better prepared for the holidays?
To blow: It’s important to remember that vacations are not an unexpected expense. They come like clockwork every year, and as such, people should plan for the holiday season when creating their annual budget. If you plan to spend $ 1,200 on vacation travel, food, and gifts, you should set aside $ 100 per month all year round to cover vacation expenses. If that seems unrealistic, consider ways to reduce that amount of non-essential monthly purchases. For example, choose to forgo dining out once a week and put that money into your vacation fund instead.
If the pandemic has taught us anything, it’s to prepare for the unexpected. As you celebrate the holidays and the end of 2021, start the New Year with the determination to make your financial well-being a priority in 2022. Start by increasing your emergency fund to cover at least three months of living expenses . Also work on paying off your unpaid debts and then increase your savings contributions. These steps will build your financial resilience and help you improve your long-term financial well-being.