LEXINGTON, Ky. (FOX 56) — Black Friday is one of the biggest shopping days of the year.
Just one year ago, shoppers spent more than $9 billion on the shopping holiday.
Regardless of what holiday someone is buying presents for this year, there is a lot of pressure, especially on parents, to create core memories. This can lead to overspending, but all that spending can sometimes lead to financial trouble once the dust settles.
Dave Smyth, a senior partner at Family Financial Partners in Lexington, said if you plan accordingly, the stress will be significantly more manageable.
For new parents, Smyth suggested you don’t buy as many toys for your kids and instead maybe save up for future experiences like a trip to Disney World.
For grandparents, Smyth said to still get the toys, spoil your grandchildren, but also save a little bit of that money for a future college fund.
There are a few things every person can do to avoid overspending during the holiday season, Smyth said.
The first, and arguably most important, is to have a budget. By budgeting, you’ll be able to know just how much you can afford to spend on gifts, dinners, travel, etc.
The next step is to make a list of people you want to buy gifts for. This could be kids, parents, siblings, cousins, and so on.
Branching off that list, Smyth said once you make that list, don’t be afraid to check it over twice, like Santa Claus, and try to see if there is anyone you could maybe do a Secret Santa with during the holidays, so instead of having to buy a gift for each of your five cousins, you can buy one and do a little bit more of an exchange.
The last tip is that once you have all your gifts in your shopping cart, especially if you’re shopping online, walk away from the screen and come back in a few hours. By doing this, you can make sure you’re getting the best deal as well as making sure you’re getting the best gift possible.
“There’s a lot of retailers that, if you look at their websites, if you’re not familiar with them, they’ll actually markup their items and then quote, unquote, discount them,” Smyth explains. “On Black Friday, people are going to spend additional dollars on things that aren’t going to be under the tree or that aren’t a necessity for their family plans, and therefore, those core memories they’re trying to make. They get free shipping, but they’re also blowing up their budget.”
Unfortunately, some people will overspend during the holidays and may find themselves in a bit of a financial hole to start the new year.
According to Nielsen IQ, roughly 46% of people spent more in 2022 than they did in 2021 on Black Friday, with the average person spending nearly $400. This is due in part to the majority of people thinking the deals were better last year compared to years prior.
If you do find yourself in a bit of a financial hole coming out of the holidays, Smyth said there are some things you can do to lessen the dent.
If you can, try to pick up extra hours at work or find a side hustle like driving for Uber or Instacart.
If you’re making a larger purchase, like a new car or a washer and dryer set, for example, see if you can opt for payment plans to be made over an extended period of time.
By doing this, you can budget a little bit better for that purchase and won’t have to worry about taking on the lump sum of that purchase once you get that next credit card bill.
Lastly, Smyth suggested that to avoid falling into such a deficit in the years to follow, create a holiday fund. Kind of like a rainy-day fund, where you save a little bit each month that you don’t use until the holidays come around.
“If you’re getting a credit card bill and it says the minimum payment, I would suggest people look at, most likely, double the minimum payment and try to make that your goal, because that’s going to pay that credit card off instead of in, you know, 19 or 20 years,” Smyth outlined. “It’s going to pay it off in typically less than less than three.”
If you can pay that credit card bill in full, Smyth encouraged people to do that so as to avoid paying interest.
He also suggested avoiding giving cash gifts to relatives, as it will quickly no longer be a gift for them but rather something the recipient relies on each year for their budget.