It's hard to believe we are into November, with the holiday season fast approaching. Too often, holiday spending creates debt for us, as we spend beyond our means and pay for it in the following year.
Today, Paula explains how to avoid these pitfalls. The first strategy of course, is to budget for the year ahead of time. This means having a set budget for the holidays, dividing that number by 12, and setting aside money every month to prepare.
Producer Jon says that he likes to spoil his nieces and nephews every holiday. But when you were a kid, which do you remember more? The cash in a Christmas card from Grandma and Grandpa, or the time you spent with them? Was it a play, a baseball game, or even just a fun sleepover at their house? Not every gift needs to be monetary.
If, however, you find yourself in debt after the holidays, it's important to pay it down aggressively. This is especially true if it's credit card debt that carries interest. We've talked in previous episodes about the power of compound interest, and how it can really add value to your investments. But it can also work the other way. If there's interest on debt you owe, that can also compound, costing you much more than the price of the gifts you purchased.
With inflation rising throughout 2022, the holidays are going to cost more this year. That includes gifts and travel. Where can you save on that? Can you travel at off-peak times, like flying on Tuesdays? Some folks are even skipping holiday travel and flying or driving at more convenient times to see family.
Really, the key to holiday spending is planning. If you haven't planned for 2022, take note of what you spend so you can plan for 2023 throughout the year.
And if you need help with this, or any other topic related to managing your money, reach out to Paula Christine at https://paulachristine.com/
Check out her Making Money Matter Course, or send her an email at Paula@PaulaChristine.com
Jon: Welcome to Beyond the Paycheck. I am Jon Gay. I am producer of the show. Joined as always by our host, Paula Christine. And Paula. I wanted to sit down with you today. We've just turned the calendar to November as we record this episode and holiday shopping and holiday ads are all over the place. We're seeing Black Friday commercials on TV and all over our computer screens.
This is a really difficult time for a lot of people because they spend so much on the holidays, all with good intentions, but oftentimes we end up with debt on the backside of it. I actually think back to my radio days when I was a radio DJ in Vermont. Every single January we would do the same promotion.
We would call it the Fantastic Plastic Credit Card Payoff. We would offer to pay off your credit card, cuz everybody has credit card debt after the holidays. We wouldn't tell 'em the fine print as we had a $1,500 limit on it. But that's beside the point. So it's not just me that feels this pressure every year. I would imagine a lot of your clients do too. You spend all this money at Christmas time. And you really pay for it January, February and beyond, right?
Paula: Well, if you're my client, then you don't have that problem because you've already learned how to budget for Christmas.
Jon: Oh. Because you've been coached well. And that's what we're gonna do here today.
Paula: Yeah. That's what we're gonna do.
Jon: So I walk into your office, Paula, and it's November 1st. And I say, Oh, Paula, you know, I've got all these nieces and nephews that I've gotta buy holiday gifts for. And then my friend just had a kid and I wanna get something nice for them.
And then I've got. My wife's got her hair stylist. I clearly don't have a hair stylist, but I have, you know, the mailman, the massage therapist, or any person you get regular services to and you wanna give 'em a nice tip at the holidays. But it's so overwhelming and it is so expensive. What is the first thing I need to think about?
Paula: Well, first of all, what you really need to think about is do you need to give all those gifts to all of those people? I mean, some of them..
Jon: I have a good heart. I have a big heart. I like to help people out.
Paula: Well, I appreciate that you have a big heart. Is there something you can do, like instead of buying individual gifts for your nieces and nephews, what if you took them to a holiday show or out to dinner or something that would be less expensive than buying each of 'em or invite 'em to your house and play board games?
How fun would that be? I mean, there are options that you can do that are less expensive, especially if you're not prepared for Christmas, because we don't want to get into credit card debt over buying someone a gift.
Jon: It's funny, I never thought of it that way. But I think as a little kid, I remember time that I spent with my grandparents and specific things that we did, more so than getting a $50 or a $100 bill in a card every December.
And I have the misfortune of having a December birthday, December 18th, and I'm Jewish. So December 18th usually fell during Hanukkah. So it was like, here's your combined gift, Jon. And I I always felt like I got the short end of the stick. The Sagittarius.
Paula: It would be a bummer to have a birthday in December or even around the 1st of January cuz it's hard to buy two gifts.
You know, I talked with a client years ago, she was setting up her estate. and she wanted to make sure that her kids inherited a certain amount of money. And I asked her, I said, Why is that important to you? And she goes, Well, I wanna make sure that they get this money as a gift.
And they have it after I pass away. And I said, Wouldn't it be better to give them the gift today? You've got seven granddaughters, why not take 'em down to the theater and see a musical? And your grandsons, take 'em to a baseball game. That's the memories that I have of doing, like you talked about, doing fun things with your grandparents.
Nobody remembers if you got 10 bucks or a dollar or a hundred dollars . You just don't remember that. And chances are when you give cash like that, Most people use it to pay a bill.
Jon: Yeah. Well hopefully the kids aren't
Paula: Well. Yeah. Well, hopefully the kids don't have a bill but you know what I mean? Adults.
Adults will usually use it to pay a bill.
Jon: Eight year old's paying off their iPhone bill anyway, that's a good thing to think about, saving some money and deciding, Okay, do I really need to give this to the mailman, or can I do an experience that's less than writing a check for a hundred dollars for the nieces and nephews, grandkids, things like that.
What happens though? Say I walk into your office in January and I've made all the mistakes that you would've cautioned me against if I had walked into your office in November. What do you say to somebody who is facing some debt from the holidays?
Paula: Well, you've gotta set up a plan one to get out of debt. So how are you gonna do that? So let's say Christmas cost you $1,200 that year. You gotta figure out, well, if you can't pay it off when the bill comes, then you gotta put a plan into place in your budget. So hopefully you're living on a budget. You can put in how I'm gonna pay off that credit card, and then if you don't wanna have to get on the situation again next year, then again, if that's $1,200 a year that you need for Christmas, then you wanna put a hundred dollars a month away each month into a Christmas account.
And when Christmas comes, you can then pay cash.
Jon: I love that advice of setting that money aside for the year. And budgeting is something that my wife actually taught me because when we were single, we were long distance. I've mentioned this on the podcast before. She was here in Detroit, I was down in New Orleans and when a friend would get married or a friend's kid would have a bar mitzvah, I'm buying a plane ticket and I've taken a big trip and I'm like, Oh, there's 600 bucks that wasn't in my budget this month.
And since we've been living together and we've married five years now, she'll say, Okay, well you've got this conference coming up in August. Why don't you start saving money in May, June, July, leading up to it, or, Hey, you know, you've got this trip coming up, we're gonna go on vacation, We're actually going to Disney World the week after we record this episode.
So we've been saving for months up leaving to go up to our vacation in Disney World. Planning forward ahead of time with the foresight instead of the hindsight of, ah, geez, I just blew my whole budget for the month cuz, you know, it was Christmas, so I got, you know, December, that December's more expensive.
But what you're saying is December doesn't need to be more expensive if you spread it out over the course of the year.
Paula: Yeah, it took me a while to even grasp that concept cuz I was, same thing. I was charging Christmas and then in January I couldn't pay it off and then I take me months to pay it off and then I finally said, Well what am I doing?
I'm paying interest on Christmas gifts, which doesn't make any sense. So pre plan. You can preplan anything in your life. You can preplan buying a home. You can preplan your retirement. You know, anything that you wanna save for vacations and Christmas, you know they're coming, so why not plan for them?
Jon: I'm really glad you brought up the interest piece of it, because first off, you'd wanna be, if you're in terms of baseball here, you wanna be ahead in the count, not behind in the account. You wanna be in good shape to look ahead to these expenses as opposed to trying to catch up after the fact. And yeah, look, we'll use our $1,200 example.
If you got that $1,200, especially if you put on a credit card, chances are you didn't have that $1,200 laying around. You get to January or February, you can't pay it off in that first month that it hits the credit card. Now you're paying interest and now you're paying more than $1,200.
Paula: Correct.
Jon: We've talked in previous episodes about investing and the power of compound interest and how that can help you. On the flip side, that can hurt you. You get the interest charge that first month, you don't pay the whole thing. That interest compounds on itself and $1,200in high interest credit cards can become $1,500, $1,800, $2,000 real quick.
Paula: Right, right. And think about inflation right now, how everything is gone up. So now it's Christmas season, holidays and you do wanna give gifts. And I think sometimes you gotta think outside of the box to what was really important. And spending time is more important than spending money. I'm sure the retailers out there wouldn't like to hear that comment, but you know, like I just went to the grocery store and I was really shocked at how much I had to spend.
So I know that the Christmas gifts are gonna be really expensive this year.
Jon: And if you've got something in high demand, that's gonna be hard to get. If you are planning on traveling for the holidays, airline tickets are through the roof right now. You know, gas has been ping-ponging all over the place the last several months, so that's another factor to think about too.
If you're gonna see family over the holidays, not only are your gifts gonna be more expensive with inflation, as you just mentioned, Paula, you're also gonna be spending more money on travel, which is further going to add to the stress on your wallet, on your bank account.
Paula: But you already know that you're traveling this year, you know you're traveling, so probably in 2023 you're gonna travel.
So again, it goes about just planning, you know that it's gonna happen. You can maybe estimate the cost, put that in your monthly budget. Again, if we go back to you need $1,200 for gifts and you need a thousand dollars for travel and break that out over a monthly expense and put it into a savings account so when the time comes, you've got the money to pay it off, pay it in cash.
Jon: And you might even get a couple pennies on interest on it too. You might even grow a little bit over the course of the year too.
Paula: Correct. But I know it's stressful. I mean, kids want all the new toys and gimmicks and as a parent, you want your child to be happy. It gets very tough and I think sometimes we get into where we want all those things for our kids, and in doing that, we sometimes get ourself in trouble financially.
Jon: Right. Whether it's the Cabbage Patch kid, the Tickle Me Elmo, the whatever.
Paula: The Cabbage Patch. I haven't heard that..,
Jon: I was, I'm a child of the early eighties, so that was top of mind for me. But there was always that hot toy. And whether it's the Nintendo or whatever it is, every single year there's something, and of course you wanna take care of your kids.
A little bit of planning is so key. I think about, um, actually I'm not traveling for the holidays, but in mid-December I'm going to Vegas for a weekend with a friend. We're both Patriots fans and the Patriots are playing in Las Vegas. So we're going for a weekend, it's mid-December and he just bought his airline tickets last night from when we're recording this and airline tickets went through the roof. He ended up finally getting a good deal on airfare. But he is got like two stops along the way. He's like Boston to Charlotte, to Chicago to Vegas, and the same thing on a red eye the way back. And I'm like, Dude, why? He's like, Everything else was so expensive. So I had to take these red eyes with two stops.
I'm like, well, That just speaks to planning, like we're talking about planning out for the holidays, whether it's expenses or anything else.
Paula: You know that trick of the trade on travel, if you look at travel tips, is usually you look to buy your tickets on Tuesdays. That seems to be the thing. And then if you if you travel midweek versus traveling on the weekends. So if you do a Tuesday to Tuesday or Wednesday to Wednesday, your tickets tend to be a lot cheaper.
Jon: And that is big with the holidays coming up too. You do not wanna be crammed into that airport, whether it's Thanksgiving or Christmas or any of the big holidays.
Christmas is on a Sunday this year, Thanksgiving and Thanksgiving weekend, obviously Thursday into that weekend. So not only will you save the hassle of the holiday, you'll also save a few bucks. Typically, if you travel during the weekday as well.
Paula: I know this is an odd concept and I kind of wish that I could, you know, get even my family because you know the divorces and you've got kids and then your kids get married and holidays get split. For anybody that's married, usually holidays get split, but does everything have to be celebrated on Christmas day? I mean, could you not? I get the whole thing, but could you not pick a different day and maybe it doesn't cost as much to travel?
Jon: That's another great tool as well. So most of my family is in New England. I'm here in Michigan. My wife and I kind of made the decision. We're just not gonna travel over the holidays because not only do you have weather issues, we either drive and get stuck in snow and ice between here and New England that time of year, right? Yeah. Or weather delays trying to fly.
What we've done is we've started making an annual trip over the summer where we can drive and the weather's better. We can even bring the dog if we wanna bring the dog too for a week. And I think the bigger point here that you're getting at, and I totally agree with you, Paula, is think outside the box, maybe think outside the box and do some things that are a little bit less obvious, You know, whether it's traveling on off days or traveling in off seasons.
But the key to all of it, as you said, from the top, is the plan. Planning it out.
Paula: The plan. So if you need a budget, if you go to the website, PaulaChristine.com, there is a Google Sheets and Excel budget that you can download that can help you get started and managing your money.
Jon: That is on the resource page of PaulaChristine.com. Also, you can find the Making Money Matter course on her website as well. We'll link to all of that in the show notes. Again, the website is PaulaChristine.com or you can send Paula an email. Paula@paulachristine.com. Uh, happy holidays to you, Paula. Always good to be with you.
Paula: You too. Thanks Jon.