Avoid Going into the Red on Black Friday

Nov 27, 2013

For many, throwing around the football Thanksgiving morning and sitting down to watch football Thanksgiving night is a beloved holiday tradition. But for many more, the real sport takes place after turkey day – shopping.

In fact, according to a survey by the National Retail Federation, the average holiday shopper spent $423 the weekend after Thanksgiving last year, with total holiday spending topping $59.1 billion. In addition, the shopping bonanza wasn't limited to stores as consumers also spent more of their holiday budget online. According to the survey, the average person spent $172.42 online over the weekend, or approximately 40.7 of their total weekend spending.

“All signs point to both of these numbers only trending up this year, with stores continuing aggressive incentives coupled by Americans re-opening their wallets now that they see light at the end of the recession tunnel,” said Aaron Montez of AXA Advisors Southwest.

But isn’t overspending a major part of how we got into this mess in the first place?

“Certainly, binge spending during the holidays didn't help,” said John Arnold of Southwest Wealth Strategies. “It seems to happen every year – recession or not – that no matter what we budget, many of us get caught up in the holiday spirit and end up spending more money than we can really afford to.”

So, in an effort to curb binge spending this holiday season, here are some tips from the experts on how to avoid going into the red during Black Friday, Cyber Monday and all those festive shopping days through the end of the year.

Let Cash be King

“We often tell our clients to do the exact opposite of what every major retailer is tempting them to do – put away credit cards, don’t open new ones and instead use cash,” says Montez.   According to Montez, by using actual cash for purchases, no matter how big or small the amount, it reminds shoppers how much money they have coming in and physically going out of their wallets at any given time. Coupon like the Kids “Remember when you were a child, before you had access to a car or even real money aside from an allowance, and you would make your parents homemade coupon books and cards rather than spending a dime?” says Trevor Bush, vice president and manager for the Arizona retail banking division of Washington Federal.

Bush recommends putting together some “experiences” for loved ones via a coupon book or event customized card/letter rather than just giving store-bought gift – especially as stocking stuffers, where folks don’t often budget and almost always over spend.

Personalize Gift Cards

“My wife used to have a rule that apparently many wives have – never give gift cards, as they can be thought of as a thoughtless, last-minute gift,” says Arnold. “But, if you have a hard time sticking to a holiday shopping budget, a carefully selected gift card can be a critical method to avoiding a spending binge.” Arnold notes even his wife has come around to gift cards, but only if they mean something.   “A gift card for your parents to the restaurant where they met, or a gift card from an airline for a close friend to use toward an upcoming special trip he/she is planning absolutely mean something – but still force you to spend a pre-determined, with-in budget amount,” says Arnold.

Don’t Save Your IRA for another Day

“If I had a dollar for every person who skips out on funding their retirement accounts – such as 401Ks or ROTH IRA – from October to January, I would probably have enough to retire myself right now,” says Montez.   It is critical to continue usual monthly contributions, especially those that come out of one’s paychecks before they are deposited into the bank, even during holidays.   “If the extra money – the money meant for your savings and retirement – isn’t there in the first place, it takes a lot of the temptation to spend extra money away,” says Montez.

Give Your Time as a Gift

“The holidays may not be a time of celebration and happiness for all of us in this community,” says Bush. “Why not talk to the family about donating time at a soup kitchen, homeless shelter or nursing home together rather than spend hundreds of dollars on a fancy holiday dinners or nights out on the town this year?”   For many, says Bush, this is a popular new family tradition – giving time rather than receiving that hefty restaurant or grocery store bill.

Ask your Parents about 10/10/10 before 12/25/13

“Back in the 1940s, when folks were still raw from the Great Depression and in the midst of WWII, a savings habit called 10/10/10 was born,” says Arnold. “This called for 10% of one’s salary to be set aside for mid-term financial goals like a new car or roof; 10% for short-term financial goals including holiday gifts and vacations; and 10% for long-term retirement.”   Many Baby Boomers today, in fact, are entering retirement thanks in great part to their adherence to this method.

“There is certainly a science to saving – or at the least avoiding debt during the holidays,” says Bush. “The key is blending it with the art of gift giving, celebrations and sales.”