Simple Tips for Dealing with Holiday Financial Stress
Do the holidays have you down? You may be struggling to keep your head above water when it comes to managing your finances during the holidays. This time of year is often filled with pressure to buy expensive gifts and spend money on the costs associated with attending social gatherings. Consequently, you may be facing dwindling bank account balances and growing credit card bills. Or perhaps you’re engaging in emotional spending since this time of year can be a reminder of loved ones lost earlier in the year or failed relationships. The Cheat Sheet spoke with Kevin Morris, vice president of retirement and income solutions at the Principal Financial Group, for insight into how to best manage the strain that often accompanies the holidays. Morris also expounded on some of the survey results from The Principal Financial Well-Being Index.
The Cheat Sheet: Why are consumers so stressed about finances during the holidays?
Kevin Morris: We’re being pulled in more directions–shopping, parties, family time–the list goes on. For those of us procrastinators (I’m raising my hand here), it becomes very easy to overspend for convenience. If we don’t order gifts soon enough, we get hit with “rush” shipping charges. Don’t have time to make dinner? Dining out can really start to add up. Some of these convenient options can creep in and really start to unravel our finances if we haven’t planned ahead.
CS: The study results found that men are handling the holiday financial stress better than women. Why?
KM: Our research shows that men tend to be more confident about their finances than women in general, and coincidentally, they’re also more likely to work with a financial professional. According to The Principal Financial Well-Being Index: American Workers, men (40%) are more likely than women (30%) to say the holiday will put no stress at all on their personal financial situation. Men are also more likely than women to say they feel in control of their personal financial situation (63% versus 32%). What’s interesting is that we also saw that men (20%) are more likely than women (11%) to put holiday purchases on a credit card to pay for them later, so there might be something to that as well. Perhaps women are feeling more stressed because they’re actually paying for their items now versus putting it off. We’ll have to see who’s more stressed come January when those credit card bills roll in.
CS: What are some signs that holiday financial stress is starting to take a toll?
KM: People are telling us they’re stressed. This year, 64% of workers said holiday spending will put a moderate or great deal of stress on their personal financial situation. It’s encouraging to see that 31% say their financial New Year’s resolution is to put money into savings each month, and another 28% plan to tackle credit card debt. To me, this shows they’re acknowledging their stressful situation and planning to take steps to address it so they’re not as stressed come next year.
CS: How can consumers better manage holiday financial stress?
KM: Planning ahead is always a great way to help manage holiday stress. And it doesn’t have to be as daunting as it sounds. Simple things like making a gift list—and checking it twice—before you go to the store can help minimize impulse purchases. I want to make an important distinction between buying and shopping. Buying indicates you have a plan and you’re just going to the store to purchase your item. Shopping can be more dangerous: strolling around the mall, wandering aimlessly. We’ve all been there. If you’re shopping without a plan, you run a higher risk of overspending, wasting time, and not getting what you really want. Put those things together and you end up with a stressful situation.
The Cheat Sheet: What are some other ways to stay in control of finances?
Kevin Morris: Setting a budget for holiday gifts is also a great way to stay on top of your finances. This year, we saw that 52% of American workers planned to set a budget for holiday gifts, and of those, 85% said they were likely to stick to their budget. Those people have to be feeling better this holiday season, because when you have a plan, it helps you feel in control. And when you’re in control, you make better long-term financial decisions.
CS: What are some tips for sticking to a holiday budget?
KM: The biggest thing people can do is to plan ahead. By starting your shopping earlier, you can spread out those expenses over a few months so you don’t get hit with one big credit card bill come January. If starting earlier isn’t an option, then some solid planning can help. Write out who you need to buy gifts for and try to do some research before you go to the store. Minimizing impulse purchases can really help you stay on track. In general, your holiday budget should be part of your overall budget. To help set that up, you might want to consider working with a financial professional. They can help you take an honest look at what you can afford and how to keep your budget balanced all year long–especially during the holidays.
CS: How can consumers recover if they go over budget?
KM: It can be easy to go over budget if you don’t have a plan. Even if you do have a solid plan, we know that sometimes things happen. If you go over your budget, it’s important to lay out a plan to get back on track. That might mean cutting spending in another area next month. We’ve seen for the past three years that dining out continues to be the No. 1 area where people blow their budgets, so that might be a great place to start to cut back. Make sure you don’t overcompensate for your credit card or other debt and stop doing things like saving for retirement. It’s important to remember to pay yourself first; “future you” will be glad you did.