Linda @ The Cents of Money
Consumer spending has been strong throughout 2023 despite high inflation. They have been resilient due to higher grocery costs and gas prices. However, consumers may be slowing down and seeking more deals, as reflected in recent earnings from major retailers, including Burlington, Costco, Target, and TJ Maxx. This trend will likely continue, with households spending less on the holidays.
According to The Conference Board Holiday Spending Survey, US consumers plan to spend an average of $985 on holiday-related items in 2023, less than the $1,006 reported in 2022. As part of this total, consumers intend to spend an average of $654 on holiday gifts, up 6.7% from $613 last year. By contrast, consumers expect to spend much less on holiday-related non-gift items this year—only $330 compared to $393 in 2022, a 16% decline.
As we end the year, reviewing your financial plan to spend wisely, make end-of-year investing decisions, and have fun is an excellent time.
1. Make a Budget For the Holidays
Do you shop more during holidays? Make sure to have a holiday shopping list. Research what you need and see if you can get a deal or promotion on Black Friday. In recent years, there have been many deals throughout the holiday season. Are you hosting a dinner or a party during the holiday season? Make a grocery shopping list early so you can spot deals. Food may be more expensive this season due to inflation.
Plan your gifts early, estimating the cost so you can distribute cash or presents to your family, friends, co-workers, neighbors, and people who help you year-round, including those who do your lawn, handyman, dog walker, and postman.
2. Keep Track Of Your Spending
Track your spending and use your budget to guide you. Try not to go off-script. Search online and put items in your cart to prompt follow-up coupons and discounts on your purchases. The point of tracking spending is to be more conscious about your purchases to be guilt-free and enjoy the holidays.
3. Shop Early to Avoid Procrastination
Start shopping early so you aren’t forced to buy in a hurry. When we procrastinate, we spend more as stores get more crowded. Do comparative pricing online to better gauge what gifts will cost this year.
4. Pay Off Credit Card Balances
The holidays are often stressful, especially when we increase our credit card balances, with interest charges averaging 20%. According to the Third Quarter 2023 NY Fed Household Report, credit card balances jumped to $1.079 trillion, up $154 billion sequentially. More alarming, the share of card balances transitioning to 90+ days rose to 5.78% from 3.69%. Some borrowers are getting pinched by student loans. If you are using credit cards this season, plan to pay off your balances in full as soon as possible.
5. Use More Cash
If you know you will overspend if you use your credit cards, try using cash. It is a good way to keep track of your money for smaller purchases. You will feel pain more immediately and often are more informed about your purchases.
6. Be A Savvy, Not Impulsive Shopper
The holiday season is a tricky time to shop. Typically, you are not buying things for yourself. Gift shopping is more of a necessity because we are getting something for family and friends. Don’t feel any guilt looking for bargains for others. Merchants are taking advantage of us during this time, with red sale signs that aren’t always bargains. The store is brightly lit, and holiday music is being piped in. That’s marketing psychology at work, making us feel nostalgic and joyous., but it sometimes leads to impulsive shopping. Be more mindful, and stick to your list.
7. Year-End Tax Strategies For Your Portfolio
While your mind may be on the upcoming holiday season, this time of year is a good time to consider how to efficiently structure your capital gains and losses in your portfolio. That means reviewing your portfolio tax-loss harvesting, which means selling “taxable” investment assets like stocks, mutual funds, and bonds at a loss. The losses of these long-term holdings (i.e., at least a year and a day) can be matched against other holdings that have capital gains in your portfolio, reducing the capital gains taxes you’ll owe. Start now before the year ends to minimize your tax liabilities. Talk to a financial adviser about selling some stocks.
8. Charitable Giving
You might do charity all year, whether it is giving of your time by volunteering or donating to charities. This time of year, there are a lot of toy, food, and clothing drives collected by your neighborhood centers, churches, or other places of worship. Participate as best you can, or make donations to your favorite charities.
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