Planning sensible holiday spending
In the first of his regular monthly columns, Bill Storie, chief executive of The Olderhood Group, urges us to think about how holiday spending fits into our long-term financial plans.
Every year the allure of Christmas gets earlier and earlier. Television commercials, store promotions, newspaper adverts, even street lights seem to appear months in advance.
Yet we still want to get caught up in the excitement of the holiday season on someone else's schedule. In fact, some folks would love Christmas to be a year-round event.
I'm not against Christmas at all and I am most certainly not against holiday shopping. I'm probably not against Black Friday shopping either although I'm not quite sure why it gets such a great rap. “Bill”, they say, “don't you crave great bargains?” Hmm, not really — I am Scottish after all.
If you are a bargain hunter and you are already planning what you are going to wear to sit on the sidewalk on Reid Street before midnight, then knock yourself out (actually don't do that). Our merchants prepare for Black Friday way in advance and do a great job. In fact, I strongly advocate that you buy in Bermuda — no need to spend even more money shopping online or buying an airline ticket to stroll some foreign mall. My mantra is stay here, buy here, and save here.
But I do recommend “sensible spending” and I suggest that everyone consider the following before heading off to the stores.
There is a great temptation to spend money without thinking on Black Friday. Nothing wrong with that approach certainly, but is the item you about to purchase a good deal simply because it is on sale?
Is this item that you are queuing up for something that you or your loved one actually needs?
Are you factoring in the money that you are spending on Black Friday into your overall holiday budget? Better yet, have you allocated a “holiday expenditure” line item into your annual household budget or are you charging things on credit cards willy-nilly and falling prey to revolving credit card debt that will haunt you all through the next year eating up money that you might otherwise have saved or invested?
Dare I mention that credit card interest rates are on the high side, to say the least. In other words, the more you spend the more interest you will pay. And the notion that you will pay for your holiday spending before the end of February is a nice idea, but holiday shopping sins have a way of haunting you well into the New Year.
A better approach to holiday spending might be this.
Have a strategy worked out for paying off holiday debt on a realistic schedule. Better yet — if you plan to spend $100 on Black Friday then ask yourself if you want the item in question enough to be willing to deduct $100 from your December spending to keep your overall budget on track for the year end.
Keep in mind that “excessive” spending one year will almost certainly be repeated (if not escalated) each year going forwards. It's your call of course, but over a ten-year period the overspend could have been set aside for school fees, a new vehicle (or dare I say it, retirement!).
No one is suggesting that you should cancel Christmas, but a little forethought and planning can position you to be generous with those you love and balance your budget enough to actually save a little money to invest in your future.
If you would like to learn more about this approach to long-range budgeting, saving and investing why not take advantage of our own Black Friday offer.
Register for one of 50 free seats at our next Financial Literacy Workshop sponsored by Butterfield Bank on November 22 (5.30pm to 7.30pm).
We will give away a few autographed copies of our book, The Third Journey, which contains three chapters on long-term money management.
To register for next Thursday's event, click: https://www.eventbrite.com/e/financial-literacy-workshop-tickets-52231608146
• Bill Storie is co-founder and chief executive of The Olderhood Group, a leading organisation in online information for people planning or presently in retirement