RALEIGH, NC — Sticking to a budget can be tough on vacation.
Although it is the season for giving, record inflation can make this time of year stressful.
Raleigh financial professional Alex Sutherland offers tips to help you enjoy your vacation without burning your pockets.
Q: How much money do people plan to spend during the holiday season?
Inflation has put a strain on budgets throughout the year, meaning shoppers need to be budget conscious as they face higher prices.
Adjusting for inflation, vacation spending is expected to see minor growth from previous years, increasing by a maximum of 3%.
Nearly 3 in 4 Americans hope to spend less than $500 by buying fewer gifts than in previous years and taking advantage of big sales like Free Shipping Day in December.
Q: How can we get into the spirit of generosity without getting carried away and putting our finances at risk?
Use a spending plan
- You don’t have to stop giving gifts, but there are some meaningful ways to give and avoid a high credit card bill on January 1.
- Look at your budget to determine how much you can afford to spend this holiday season.
- Next, list each person you need to buy gifts for and decide exactly how much you will spend on each person.
- Don’t forget to budget for extras, like wrapping paper and holiday decorations!
- If you need help making a plan, I have a vacation budget spreadsheet on my website, lifeplangroup.com
Find meaningful gifts
- Before shopping, think about what people actually want or need. It can be easy to walk into a store blind and buy gifts that your friends and family might like.
- Avoid spending money on tons of gifts that could end up in the back of the closet or in a garage sale during spring cleaning.
- If you get stuck, try making a list of what you know about this person, such as their hobbies, jokes, and personal goals.
- People tend to talk about things they want more than you think. Try keeping a list on your phone. When the time comes to buy a gift, you already have an idea of what to buy.
Consider alternative gifts
- Instead of the usual holiday gifts, give a gift that lasts. One idea is to contribute to the future education of your child or grandchild through a 529 plan. The money you save in a 529 plan will not be taxed as long as it is used to pay approved tuition. , such as tuition, fees, books, supplies, room and board.
- You can also consider setting up a checking or savings account to teach your child the basics of saving and budgeting.
Q: What should we do if we get carried away with our spending?
Stay debt free
Debt is one of the biggest things that holds us back from financial freedom. It can put a damper on your retirement plan if you don’t tackle it sooner rather than later.
There are two general schools of thought when considering how to repay debt:
Snowball – The first is the snowball method. Organize your debt by how much you owe and deal with your smallest balance first. Then tackle your next smallest balance. Like a snowball rolling down a hill, this method helps you build momentum until all debts are paid.
avalanche – Then there is the avalanche of debt. This method gives priority to the repayment of debts with high interest rates.
Either way, focus on paying off one debt at a time while making minimum payments on your other debts.
Remember that holiday spending is only part of your overall financial plan. At LifePlan Group, we help people understand their finances and guide them to make good financial decisions, so they can achieve their goals and live the life they want in retirement.