You Knew All Year the Holidays Were Coming

I came to financial planning as a profession in my 40’s, having made a mid-life transition from retail management.  I worked in both department stores and specialty retail and generally enjoyed the work. I always enjoyed Christmas in the stores – the music, the new fragrances, the decorations, and generally upbeat anticipatory atmosphere.  

Christmas time was grueling, however.  The amount of merchandise that comes into a store through its loading dock, and then out the doors in the customers’ shopping bags, is enormous.  It is very physical work, in that all that merchandise needs to be unpacked, displayed, and stocked around the store. The associates who wait on you generally have competing priorities imposed upon them:  great customer service, while getting the new merchandise out of the bins and on the racks.  

No matter where I worked, at 6 PM on December 24th, there were always customers who needed to make last-minute purchases, and the store staff was looking to get home to begin their own holidays.  I remember one year, as I was dropping the entrance gates, actually replying to a complaining customer: You knew all year this was coming.  

Fast forward to today, and I see the stresses of the holiday from the other side of the cash register.  Most people pay with plastic. The bills will come due in January. It’ll take a while to pay it all off.

From the point of view of a financial planner, I always encourage our clients to anticipate expenses and save into them rather than going into debt and paying it off.  And don’t most people do this? Yes, but inconsistently. We all anticipate the rent or mortgage payment that is due on the first of the month, make sure the funds are available, and pay for the roof over our heads for another month.  Same with the car payment. So why not Christmas?

You know all year it is coming on December 25th.  You know for whom you want to purchase gifts.  So be smart about it and add Christmas/Holidays as a line item to your budget.  Take these steps:

• Make a list of the people who will receive gifts from you
• Assign a budgeted amount to each person.  Obviously, you’ll spend more on family members than work colleagues
• Don’t forget the cost of wrapping paper, shipping, and decorations.  
• Add in the costs of festivities.  All those parties, extra meals, and associated adult beverages can really add up.  
• Don’t forget the tree!
• Once you’ve totaled it all, divide by 12, and that number goes into your January budget and every month thereafter.

What’s the result?  Peace of mind. Reduced stress.  You’ve thought of everything. You’ve assigned to yourself guardrails on spending.  If you don’t spend the budget in January, roll it forward to February, and then March, and so on.  The result is that you’ll have cash on hand for the time when you see the perfect gift for someone on your list, so you can go ahead and make the purchase.  

You can use the same budgeting technique for all the other gifts your purchase throughout the year.  Consider these:

• Birthdays and anniversaries of friends and family
• Work colleagues for whom you buy
• Events you attend as a guest – you bring flowers or a bottle of wine
• Children’s birthday parties – these can really add up!

Use the same technique:  add it all up and divide it by 12.  This is your new budget for gifts for the coming year.  Add it as a line item to your cash flow plan.  

Imagine how much more you’ll enjoy the holidays when they don’t result in a new mountain of debt to pay off! 

By Glenn J. Downing, CFP®