10 Savings Tricks for Retirees Budgeting for the Holidays
Written by
Jordan Rosenfeld
Edited by
Ashleigh Ray
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Retirees who live on a fixed or limited income may find themselves in a financial dilemma as the holidays approach. Even if you keep your gifts, travel and entertainment plans modest, these costs can quickly add up.
And really, no one should go into debt over holiday expenditures. Rather than be caught off guard by a bunch of unexpected and unplanned expenses, experts suggest retirees budget for these expenses, so their holidays can be as stress-free and joyful as possible.
Revise Your Spending Capacity
According to Hanna Grichanik, a financial advisor with Canale Financial Group, a part of Northwestern Mutual, it’s common for people who receive bonuses in their working years to simply count on that for holiday spending.
In retirement, there’s no longer a bonus, so she said you have to review your spending capacity and take a realistic look at your finances.
Make a Budget
Grichanik recommended making a budget that takes into consideration a number of things: what you spent last year, an estimate of who is in “the gifting circle” this year and what your goals are for this current year.
You want your budget to be as realistic as possible to avoid overspending.
Add to Last Year’s Budget
A good rule of thumb noted by Eric Mangold, the founder of Argosy Wealth Management, is to figure out what you spent on gifts and travel in the prior year and add 15% to 20%.
Mangold said, “Even if you don’t spend more this year, if you have little buffer, it will ensure you aren’t going to have to turn to your credit card or feel extra stressed.”
Reduce the Number of Gifts You Buy
Though it may be hard for generous grandparents, or any retiree who loves to lavish loved ones with gifts, Grichanik recommended rethinking how many you buy.
“[This] doesn’t mean you don’t get the gifts for the people you love, but [you can] organize gift exchanges. You can do it with a group of friends, a group of family, so everyone’s still getting something meaningful. But again, you’re picking one gift instead of ten.”
You can also make homemade and personal gifts, she emphasized. “You could bake cookies, make a craft, make soap, something that’s personal and you spent your time doing it,” she added.
Keep a Running List
Grichanik also recommended keeping a running list of gifts you might like to buy throughout the year, so that when these go on sale, you can jump on the discount. There are even apps that help with price tracking for this very purpose.
Start Early
If you are retired and living on a fixed income, Mangold said the best way to budget for holiday spending is to start as early as you can.
“If we are in January and you have been able to get through the holidays without racking up any credit card debt, start allocating some funds each week or each month towards your next holiday season,” he advised.
Track Your Holiday Spending an a Single Card
Lindsay Theodore, a certified financial planner (CFP) and thought leadership senior manager at T. Rowe Price, said the first step is knowing what you spend already so you can figure out where to squeeze out extra.
“To better track holiday expenses, some retirees opt to use a specific credit card,” said Theodore, “so, they’ll know for instance that all expenses on XYZ credit card in October, November and December were used for holiday gifts and entertainment.”
Automate Saving Into a Specific Account
Another way to make sure you have enough funds for your holiday expenses, Theodore said, is to arrange for a portion of net monthly retirement income (from IRA withdrawals, pension, Social Security, etc.) to be directed automatically into a taxable savings account earmarked for the holidays.
The earlier you start saving, the more you’ll have to spend come the Thanksgiving and Christmas seasons.
Carve Off Gains from Investments
If you’ve got investments that are performing well, Theodore recommended working with an advisor to carve off gains and set aside proceeds to cover upcoming holiday expenses.
This can be done either all year or just during high-gains periods.
Avoid Payment Plans That Incur Fees
Though it might seem like a good idea to buy something on a payment plan, Theodore warned against it.
“Be careful about buying gifts on ‘free’ installment plans through the retailer. These can make sense for many but can also add up and make it easier to lose track of actual money spent.”
The best way to enjoy the holidays is to know that you didn’t put yourself in financial hardship in order to do so.
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