Dear Readers,
As Black Friday looms ahead of us, I can't help but think that the race to spend is on. At least that's what retailers hope is happening. According to the National Retail Federation (NRF), it's expected that retail sales will total $655.8 billion this November and December, up 3.6 percent from last year. On the positive side, that would seem to mean that people have more money to spend. Or is it just the pressure to buy?
The holiday season is supposed to be about sharing and giving but it can also be a season of mindless spending. Consider this interesting statistic also from the NRF: More than $60 billion of holiday retail merchandise was returned last year. To me, that means a lot of returned gifts--and a lot of misspent money.
So in keeping with my theme this year of the importance of mindful spending, I want to share some ideas on how to be thoughtfully generous--and keep within your own spending limits.
Start with a list
It can be a challenge to give to everyone, so make a list and put your dearest family members and friends at the top. Then add the others in your life that you want to acknowledge in some way.
Now think carefully about what would be most appreciated by each. It's not just about how much money you spend--even if money isn't an issue--but choosing a gift that's meaningful. For some people on your list, a small token is all that's important. For others, a creative approach might be even more valuable.
Share an experience
In our busy lives, sometimes arranging a special time together--a dinner, a visit to the museum, a ballgame, a special day out--can be the most perfect gift of all. The point is that it's something you can all look forward to and share, and it won't be returned. I tend to agree with Millennials on this, who are known for valuing experiences more than material possessions.
Wrap your presents in financial know-how
- The perfect sweater might make your teenage daughter momentarily happy, but attaching it to a clothing allowance that she'll have to manage would give you the chance to teach her about budgeting, saving and spending wisely.
- A piggy bank for a younger child could come with a savings account and a trip to your bank to learn about how money grows over time.
- For a student working part-time or a young adult who has recently entered the workforce, how about helping them open a Roth IRA, perhaps with some initial funding from you? You could sweeten the gift by offering to match their contributions for a time and helping them get started investing
- If an older adult, such as a parent, is struggling financially, perhaps you could help them budget more wisely and make certain they're maximizing all their Social Security and Medicare benefits--as well as helping them out monetarily if possible. Even if they aren't struggling, a great gift could be to help them fine-tune their finances or meet with a financial advisor to set up an estate plan.
- Take a look at where your money went in 2016 and where you really want it to go in 2017.
- Review your monthly budget and make sure it's realistic. Are there areas where you consistently overspent? Were there a lot of unanticipated expenses?
- Reprioritize if necessary, making sure the things on your list of essentials truly are essential. Plan more specifically for the 'nice-to-haves' so they don't derail your budget.
- Take a comprehensive look at your debts--from mortgage to credit cards--to make sure you're not overextended.
- Review your retirement savings. If you've slipped up this year, put retirement at the top of your list for 2017. Up the percentage you're contributing to a 401(k) or IRA. If you're self-employed, consider opening a SEP IRA or other small business retirement plan.
Resist the hype and enjoy the season!
As the pressure to spend builds during this holiday season, don't lose sight of your own values and your budget. A little awareness now of what you spend, how and why you spend--as well as refocusing on how much you can really afford--will help you resist the pressure to spend mindlessly on things people really don't need.
Most importantly, it will help you show your generosity to your friends and loved ones in a way that reflects your own realities and values--and allow you to fully enjoy the spirit of the season.
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Looking for answers to your retirement questions? Check out Carrie's book, "The Charles Schwab Guide to Finances After Fifty: Answers to Your Most Important Money Questions."
This article originally appeared on Schwab.com. You can e-mail Carrie at askcarrie@schwab.com, or click here for additional Ask Carrie columns. This column is no substitute for an individualized recommendation, tax, legal or personalized investment advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager.
COPYRIGHT 2016 CHARLES SCHWAB & CO., INC. (MEMBER SIPC.) (#1116-3706)