The holiday season often carries added stress for families who are financially strapped and trying to find the perfect gifts for everyone on their list. However, ongoing inflation with grocery and energy prices and the rising credit card interest rates could mean Americans may need to spend a little more time planning financially for a happy holiday season.
GOBankingRates sought out tips from financial experts, including ONE co-founder and CEO, Brian Hamilton, whose company spearheaded a survey on American spending during the previous holiday season to help with your peace of mind and financial security. The results of the survey showed a need for Americans to take inventory of their financial well-being this year, as 48% of middle-class Americans polled said they face financial stress as the holidays approach.
“Your mental health is closely tied to your financial health,” Hamilton observed. “What we found during the pandemic was a massive mental health impact, with everyone being locked indoors. There were a lot of reasons why people became more aware of their mental health. And we discovered a close correlation between mental health and financial health.”
Taking steps to keep your finances in check this holiday season can improve your overall well-being. Ken Lauher, a coach who helps people unlock breakthroughs surrounding relationships and money, added, “Financial well-being can tie directly to a person’s level of stress, fear, self-doubt and anxiety. When a person is calm, relaxed and feeling grounded, the financial aspects have less of an impact on their choices. When a person is stressed because of their finances, it can impact all areas of their life.” So how do you stay stress-free about finances when you’re hit with expense after expense during the holiday season?
Set a Budget
The first tip on each expert’s list wasn’t surprising, but it is important. “Have a budget and stick to it,” Lauher said.
Josh Miller, senior vice president at KeyBank, added, “Once a budget is established, you can put those funds aside, or start saving part of every paycheck, to meet that need and avoid dipping into emergency savings.”
Of course, if you haven’t already started saving for the holidays, it might be too late to set aside all you need. In that case, Tony Molina, CPA and product evangelist at Wealthfront, advised starting with a list of people you must shop for and how much you’d like to spend on each person, along with gift ideas in that price range.
“After you’ve written down your gifts, add everything up and figure out if this seems like something you can afford without going into debt,” Molina said. “Unfortunately, many people spend more money than they can afford on holiday gifts, leaving them saddled with credit card debt. No one wants to go into the new year on the wrong financial foot.”
Start Early and Seek Out Sales
“If you’re a last-minute shopper, you might not have a good year,” Hamilton said, pointing out supply chain issues and rising prices as two concerns of middle-class consumers polled in the ONE survey. If you can find the gifts you want, they might cost more than you wanted to spend.
Molina points out, “The earlier you start to plan, the more time you have to look for savings and find the best deals. Black Friday isn’t the only day to find savings; retailers will often run sales around the holidays to get shoppers in the door.”
Molina and Miller both recommend using apps to compare prices and get notifications of in-stock items and price cuts. “You can set online price alerts, where you’ll get a notification if the price drops for an item on your shopping list,” Molina said.
Create a Safety Net
Hamilton and Lauher both recommend having a safety net for those times when circumstances force you to exceed your budget. “Have an emergency credit line that isn’t a ridiculous interest rate if you have to carry a balance,” said Hamilton.
Lauher added, “When a person has a moat of safety, they make different choices and take different actions. Not only can it help to reduce your overall stress, but it can also improve your ability to relax, rest and restore. Many people are so used to having financial stress, they continue that cycle.”
But how can you break that cycle? Lauher said, “To reduce financial stress, have a plan. When a person can take daily actions to help them reduce their stress and anxiety, it can have a positive impact on their levels of income and allocation of money for investments.”
Lauher recommends the simple step of starting to build a savings fund by scheduling a dollar amount each week to be set aside. “If you have a bank account, have the money automatically moved from your checking into your savings account,” he says. “It’s less about the dollar amount and more about the habit and consistency of investing.”
Hamilton agrees. “Those shock absorbers — the availability of affordable credit and an emergency savings balance when you need it — can help provide peace of mind and mental health.”
Overspending can be tempting, especially during the holidays. “Most people will match or overspend based on their savings and income,” Lauher said. “Just because you have some money saved does not mean you should spend it.”
Instead of emptying your bank account for the season’s hottest electronics, spend more time and care choosing thoughtful and meaningful gifts for friends and loved ones. Remember the reason for the season and think about what you loved about the holidays as a child. “Take a moment to journal the things that made you feel wealthy during the holidays as a kid,” Lauher suggested, reminding people that a specific meal, holiday treats or the scent of candles can evoke feelings of wealth, peace and comfort.
By taking time to appreciate simple things, such as houses around your neighborhood decorated for the holidays or local Christmas tree lightings, you can reduce stress tied to expenses during the holiday season. “Often, the feelings of wealth are less about the dollar amount and more about the feelings,” Lauher said.
Protect Yourself Against Credit Card Fraud
Another issue that could cause financial stress this holiday season is credit card fraud, which is currently at historic highs, Hamilton said. He believes that consumers should be paying more attention to this potentially stressful occurrence and taking steps to protect themselves.
In the same survey, less than 20% of respondents reported being “highly concerned” about credit card fraud, while roughly 47% were “mildly concerned.” More than one-third were either not concerned at all or “not very concerned.”
Yet, credit card fraud can cost you time and money, and put a damper on your holiday shopping plans, if your account is breached.
Hamilton recommends generating virtual cards or virtual account numbers to protect yourself online. “With the One account, you can create pockets of money for specific expenses or even specific websites. Then, you can create a virtual card tied to that one pocket. You can use that virtual card online, and if one of those websites is ever compromised, you just deactivate that virtual card without touching your primary One card,” he explained.
This is especially important if you’re shopping on lesser-known websites, where fraud might be more likely. Overall, being mindful of everything from your spending and saving habits to where you shop can help you have a low-stress holiday season and start the new year feeling better about your finances.
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