Smart Holiday Spending Strategies

I know it’s still early fall, but I hope you will hear me out on why it is essential to figure out your holiday spending strategy ASAP.

I have always tried to help you right-size your holiday gifting so you don’t greet the new year with a spending hangover. But this year is shaping up to be extra dangerous if you don’t resolve right now to be smart in your gift spending.

Our still stubbornly high rate of inflation means that you may find holiday gifts cost a lot more than a year ago. And those of you who listen to my absolutely 100% free Women & Money podcast know I have been cautioning that the next year or so could be rough for the economy. It’s not clear if we will be able to avoid a recession. With an economic slowdown and a potential risk in the year ahead, now is not the time to be overspending.

I hope you will take the time to seriously listen to me on key holiday spending moves.

How to Spend Smart This Holiday Season

Put yourself first! Sound selfish? It’s the opposite. I want you to put your financial needs front and center. If inflation is already making it harder for you to pay bills and stay on track with savings goals, then you should not feel any pressure to spend money on gifts. True generosity is when you are as generous to yourself as you are to others.

Give yourself. Chances are there are plenty of people in your life who would so appreciate a gift of your time. Your offer to babysit. Or dog sit so they can get away for a day. Or gifting X hours to help them with whatever DIY project they would love to tackle. Gifting doesn’t need to involve spending. Or spending on everyone in your life. Pick your spots.

Rope in your extended family. It’s still early enough in the season that you can propose a budget-smart gift-giving strategy for the family. Maybe the adults don’t exchange gifts and you group gift-giving to kids. One gift from aunts and uncles, not multiple gifts from each relative. That’s not being cheap or unfair. Again, it is in the spirit, while also helping everyone stay on track with financial goals.

Gift what they need. Do you have family or friends who you know are feeling the strong pinch of inflation? For any Gen Zers in your life, a grocery gift card is likely going to be a big hit. Have family or friends who are DIYing home improvements? There are plenty of gift cards that would work great for them (but again, the best budget-friendly move is to gift them some hours of help on those projects).

Do not rely on buy now, pay later. You know I think the BNPL offers at online checkout to split your purchase across four interest-free payments is dangerous. The problem is that when you see you only need to pay $25 right now for a $100 purchase, it sends an implicit message to you that you can spend even more right now. I also worry about losing track of how many times you have used BNPL, and then not being able to stay on top of all the payments you will owe over the next eight weeks. Please, do not use BNPL to talk yourself into spending more this holiday season.

Gift emergency savings, or a Roth IRA. This is for the parents and grandparents, and aunts and uncles who are in solid financial shape and want to help their adult kids/grandkids/nieces and nephews. It can be hard to get rolling on savings goals, when rent and groceries are costing more and you are just early in your adulting years. That’s where you can step in with an amazing gift.

Be clear that you hope it is used for a specific goal, such as jumpstarting their emergency savings. Or helping them save (or save more) in a Roth IRA. The only rule with a Roth IRA is that the person with the account must have earned income for the tax year that is at least the amount of their Roth contribution. But there is no rule on whose money can fund the contribution. It is totally okay for you to gift money they can then contribute to a Roth IRA.

And please know that I walk the walk on not going crazy with gifting. For years KT and I have exchanged homemade gifts, not store-bought. Those gifts, from the heart, are priceless. That’s our choice, of course. If you prefer to purchase gifts, that’s fine. But only if it is within your means. Running up big credit card balances is unacceptable. And feeling pressure to take money from savings (or stop adding to savings) to buy gifts is also unacceptable. No one who matters loves you for what you spend. Please don’t lose sight of that.