Do the Holidays Have You Spooked?

Do Holiday Finances Have you Spooked?

By Jane Wolery, MSU Extension Teton County

Teton County, MT, December 2, 2016– There is a famous holiday tale in which three ghosts make an appearance.  The classic tale about past, present and future offers a message so timeless that it has resonated for nearly 200 years.  All of a sudden I’m feeling a bit of pressure about the words I’m trying to string together!  I doubt what I have to write will have that kind of literary reach, but I hope it will help in the present, or should I say with the presents.

The holiday season is upon us and with it some of us will find ourselves facing the financial and perhaps, emotional, pressures of gift giving.  This week I was listening to a video on the America Saves. Start Small. Think Big. website.   The video featured two economists discussing holiday spending impacts.  As I listened, I thought about those three ghosts.  For many in our rural, ag-based economy the past year has been haunting them. I believe for many the past year has been a tremendous challenge, leaving some producers wondering if they can hang on and how to adapt spending to match a substantially diminished income.  The ag economy affects more than local producers.  Local businesses and other residents feel the secondary impacts.  We realize how interconnected we all are within our local economy.  

If the past year hasn’t been great financially for you, and you feel white as a ghost as you are faced with the holiday present, how do you manage?  The economists on the video I watched talked about mismatched earnings and expenses and how much the holiday gift giving and related holiday travel can create even more disproportion between the two.  There is more pressure to spend this time of year.  That pressure comes from advertising, non-profit fund drives, family expectations and a host of other sources.  One way to alleviate some of the pressure is to plan carefully.  Make a list of everyone you exchange gifts with and develop a budget.  Remember the “extra” places you are expected to provide a gift, such as for teachers, youth groups, social clubs, work parties, etc.  Review the list and compare it to your budget.  Consider whether the proposed spending is out of sync with your income.  If it is, it may be time to have honest conversations with the potential gift recipients and help set realistic expectations.  The bonus to this honesty is that you may lighten someone else’s burden, too.  You could suggest to friends or family to have a “second-hand swap” where you can only exchange gifts that have already been used or purchased at a thrift store.  You can also look for ways to be generous with your time and talents, rather than your money.  I have recently been reading The Five Love Languages series. No one in my immediate family has “receiving gifts” as one of their primary love languages. One of my daughters likes “quality time” to feel loved, so for her a coupon to spend time doing a craft or reading a book together would have higher value than a purchased object. My love language is “acts of service”, so for my birthday when my friend surprised me by washing my windows and mopping my floor, I really appreciated it.  For many on your gift list, there may be no better present than time.  

Readjusting your gifting to match your current economic reality may be one of the best things you can do for your financial future.  Many households are still paying off their holiday spending in April. One of the economists on the America Saves video pointed out by purchasing on credit cards, we are actually taking out a very high interest rate short-term loan.  Except that for many households it isn’t short-term and they are in the state of perma-debt with credit cards, eventually paying far more than the price tag for goods and services purchased because of compound interest. The average credit card balance looms at $16,000. The other economist mentioned that while he would not normally advocate for last minute shopping, if you are going to put purchases on a credit card that already has a balance, delaying those purchases as long as possible reduces interest.  Some households actually plan to use their tax refunds to pay off holiday spending, so any way you can narrow the gap between the purchase date and the receiving the tax refund will help.  Postponing spending as late as possible and preparing your taxes as soon as possible in the New Year can be one strategy to use to reduce the amount of your future earnings that is spent on interest payments. When the tax refund arrives, do not wait for a monthly bill, make a payment on your credit card immediately to reduce accruing interest.  See the MSU Extension Family Economics website for more information on managing your money.  

No matter what the past year has been like for you financially, I hope that in the present you can apply some strategies that alleviate financial pressure in your future.