The average family in the U.S. spends over $800 each holiday season on gifts, food, decorations, and more. These weeks at the end of the year are supposed to be filled with joy, but if the festivities put a strain on your family’s finances, the most wonderful time of the year can turn into anything but.
We sat down with local Edward Jones financial advisor Matt Ketel to discuss what Black Hills families can do to minimize this kind of holiday-related financial stress.
The holidays can be a stressful time for families, particularly financially. What advice do you have for families to help keep the financial pressure
at bay during the holidays?
Have a budget lined out well before Christmas even comes. The big thing with having a budget, especially if you’re living with a spouse, is that you want to be on the same page. A lot of families have one person who might be a big spender. And one person that might have more of a saving mentality. But you should be on the same page with your spouse or whoever you’re living with. That’s going to lead you to the best chance of success.
If a couple hasn’t had that budget conversation yet, how do you recommend someone starts that conversation with their significant other?
It’s more difficult to have once you have a problem, especially if there’s one person who is that spender and one who isn’t. Eventually, a tipping point is going to come — if you’re not putting money away for your retirement, if you’re not saving to pay off your debts and if those debts keep snowballing, a breaking point is coming. So, it might be an uncomfortable conversation at first, but it’s as simple as saying, “Honey, I think we should sit down and put a budget together, and let’s do it as something that we both agree on and something that is sustainable and we can stick to.”
Do you have any tips on saving money while shopping for Christmas?
I think it just goes back to your budget. It’s going to be hard if you get to December and want to spend a thousand bucks on Christmas. It works best if you start planning a full year in advance — here’s how much we want to spend. Let’s factor that into our budget for the year.
We have a general rule for people to go by when they’re new to budgeting. One rule we have is the 50, 30, 20 Rule. That rule
says that roughly 50 percent of your budget should be for necessities — your house, your cars, all that good stuff. Roughly 30 percent is for your wants. So that would be things like going out to eat, and your Christmas presents would fit into that budget. And 20 percent is either for saving or paying off debts.
What would you tell the stressed out mom or dad who didn’t budget for the financial aspect of the holidays and now they’re trying to figure out how to pay for gifts?
I think people can get caught overdoing it. If you get to Christmas and you’re strapped for cash, please don’t decide to buy gifts on a credit card that you can’t afford to pay off — or even more egregious, pull from your retirement plan and end up paying taxes and penalties.
This is my personal opinion, but if you’re getting in those types of situations where you’re going into debt or pulling from your retirement, that’s honestly not the kind of example I want to set for my kids, and I feel like the best gift you can give your kids is to take care of yourself and show them that you’re financially responsible.