Surviving the Holidays: Finances

Surviving the Holidays: Finances

Holidays can be so much fun… but they can also be a huge stressor on the wallet. This holiday season, we want to find joy and contentment without breaking the bank. Let's dive into a few practical strategies to keep your finances healthy while celebrating with your loved ones.

Planning Ahead: Spending Budgets

Let’s start with the idea of a spending budget. Some people don't like the word “budget.” For many of us, it's a word that we would rather not think about. But I'll share from my own experience as a certified financial planner. Often, I’ll meet with clients in January and February after the holiday season is in the rearview mirror. And a lot of them say something like, "Well, I lost track. I thought I had a plan for how I was going to attack Thanksgiving and Christmas. But I'm waist-deep in credit card debt.” Or they’ll say something like, “I just didn't make the kind of impact financially that I wanted to make this holiday season.”

Having a spending budget is a way to go in and prepare ahead for what you want to spend. And here’s an easy way to do it that sets you up for success. It involves using a little bit of math to figure out two numbers.

Everyone’s got these two numbers that apply to them, every single month:

1. Your total inflows (what’s coming in). If you work, that’s your paycheck. It can also be through other sorts of income, like social security benefits, rental income, interest on accounts, and more.
2. Your total outflows (what’s going out, or how you use your cash). A lot of people call these “expenses” and yes, most of where your money is going is probably to expenses which help keep you alive (like food and shelter). But outflows can also be other ways that you're using your money: saving for certain goals, paying off debt, giving to causes you care about, and contributing to investment accounts so they can grow for the future. 

With those two numbers, you can do a quick subtraction problem. Take your total outflows and subtract that number from your total inflows. Your answer will place you into one of three groups:

1. The number is positive (meaning inflows are greater than outflows)
   
2. The number is near zero (meaning inflows and outflows are about the same)
   
3. The number is negative (meaning inflows are less than outflows)
   

A Strategy for When Inflows > Outflows

If you're in the first (positive) group, congratulations! You’re actually in the minority of Americans, where your inflow is actually greater than the outflows. But that doesn't mean that you're done. There are lot of tempting sales and opportunities to spend money coming up in the next two months (like Black Friday, Cyber Monday, etc.).

My encouragement is to

• First, take that positive number (monthly inflows minus outflows) and multiply it by two for November and December. For example, if your excess is $500 per month, multiply it by 2 to get $1000.
• Then decide how much of that amount you're going to spend towards holiday extras (e.g., hosting or travel expenses, special experiences, gifts, etc.).

I suggest aiming for a little less than your excess; in the example above, you could set your spending budget at $800 instead of the full $1000. That way, if you go over—like many of us do—you’re still keeping outflows less than inflows. The idea is to have every decision that you make about this holiday season fit within that budget, not as a restriction but as a source of confidence in your spending.

A Strategy for When Inflows = Outflows

Let's say you're in the middle group, where inflows minus your outflows are about zero. I've been here before, when there’s just not a whole lot of extra to work with. I suggest creating a spending budget by finding some outflow areas that you can go without for period of time.

For example, if you're like me, you enjoy spending money on eating out (I love Chick-fil-A and Chipotle) but could cook meals at home instead. Or maybe there's a subscription that you have (like Spotify or Apple Music or YouTube TV) that you could live without for a little while. You decide what you're going to cut out, knowing it’s a temporary change that will allow you to live out a good spending plan for the holidays. You can start back up in January with whatever it is that you decided to go without for that period of time.

A Strategy for When Inflows < Outflows

A lot of people fall into the third group, where expense and uses of cash exceed the money that’s coming in. If that’s your current reality, know that it’s not a shameful thing. I’ve been there, and I understand it can be a tough situation.

If you’re in this group, a good strategy for the holidays is going to be setting and maintaining good expectations with other people. Celebrations don’t need to involve exchanging gifts or spending money to be meaningful. Focus on communicating your goals up front and thinking of creative alternatives to buying gifts. Your loved ones should recognize the wisdom in making sure your oxygen mask is on before you try to put an oxygen mask on others. When you’re ready, you can take time to think about what you want to change or look a little bit different to help you get to a place of greater financial freedom.

Ultimately, these strategies can help you not only survive the holidays but to live into your values. Let's make this holiday memorable, for all the right reasons.

We have more resources to support your mental health and well-being through the holidays. And we'd love for you and your loved ones to join us for Christmas services. Look here for service times and locations for Christmas at Chase Oaks.