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Expert Advice

Face financial hardship during the holidays without guilt or shame

When you think of the holidays, you might imagine traveling to see loved ones, shopping for gifts, or cooking a feast. But if you’re on a tight budget, you might not be able to afford that kind of celebration—and that can sting.

Financial stress is more common than we might think: 40 percent of Americans don’t have enough in savings to cover an unexpected expense of four hundred dollars.1 Susan Bradley is a financial planner who specializes in helping people through life changes. As she puts it, “The holidays are a time when our culture says ‘spend.’ It’s glaringly obvious when you don’t have money during this time of year.” Walking a financial tightrope is always hard, but the added pressure to spend during the holidays can make it even harder to find your balance.

How money (or the lack of it) makes us feel and act

As behavioral economist Hersh Shefrin explains, money is more than dollars and cents. It has an emotional component. For some, money represents security. For others, it’s a reflection of status or power. It’s not unusual for people who have a hard time making ends meet to feel ashamed about it, as if they’re somehow not good enough. And it can hurt even more if our friends are financially secure (or appear to be) while we’re struggling. For some, this dynamic can lead to going overboard with holiday shopping. Others may overspend to create a “perfect” holiday atmosphere. As Bradley puts it, “It’s easy to idealize the holidays to the point that we lose a grip on our cash flow. Overspending might feel good for the moment, but the lasting effects to your bank account can feel like an extended hangover after the holidays.”

Take control of feelings about money

To avoid that financial hangover, recognize these feelings—shame, inadequacy, envy, or any uncomfortable sensations—before they impact your wallet. “Notice feelings around spending as they creep up. Name them and they’ll have less control over you,” advises Bradley. “Ask yourself, ‘Where is that coming from right now? How would I describe this to somebody else? What would the opposite of this feel like?’ You don’t want to ignore the source of these feelings, but you want to get a glimpse of the other side of it, what the future could hold.” She also recommends taking it one holiday at a time—if you overdo it this year, take steps to do better next year. Whether you’re experiencing a short- or long-term change to your income, you can adjust your expectations for what a fun and festive holiday looks like.

Plan your holiday budget early

Forty percent of people spend more on holiday shopping than they had planned.2 When setting a holiday budget, Shefrin offers this advice:

  • Take your annual income and multiply by a number between 0.005 and 0.012. The resulting amount—between 0.5 and 1.2 percent of your income—will give you a ballpark estimate for the average amount people with your income spend on holiday shopping.
  • Now think about your holiday goals. If it seems impossible to meet them within this budget, raise it just enough to meet your goals—or set more modest aspirations. If you can easily meet them, you can probably spend a little less.

Once you have your budget, stick to it. Bradley suggests, “Before you go shopping, imagine how it would feel to come home knowing you stayed within your budget. It’s a powerful feeling that can be stronger and last longer than the thrill of buying. While shopping, the long checkout lines give you a perfect opportunity to ask yourself, ‘Is this worth having? Is there an alternative? Could it end up being given away after not being used? What else could I spend this money on? How good would it feel to just say no thanks and walk away?’ If you are buying online, practice stepping away from your computer for just five minutes and doing this exercise.”

Think outside the box when it comes to gifts

We give one another gifts to show appreciation and love, and we can do this without going into debt.

1. Give thoughtful gifts of time. Offer to put together a family photo album or finish a project that’s been lingering. Learn to play your partner’s favorite song on your guitar. Write a poem or make something personal. If you want to buy gifts, a white elephant or secret Santa gift exchange can be fun and affordable.

2. Enjoy one another’s company. “Slow down the pace, make room for playing games, baking together, preparing a holiday meal where everyone gets to choose one dish they will make,” Bradley suggests. “Be in nature together. Go for a walk in the woods or a park ending with a holiday picnic. Sharing time together is the focus.”

3. Set boundaries ahead of time. If your finances are tight, you get to decide how you need or want to change how you celebrate holidays with extended family. It’s easier for everyone if you can talk about what you’re comfortable with. Bradley suggests saying something like, “Rather than exchanging gifts this year, let’s just enjoy our time together. I’m cutting back on my holiday spending and instead of feeling awkward, could we please agree to not exchange gifts? We can start a new way of doing the holidays together.”

Talk to your kids about how this holiday might be different

Children can sense when adults are stressed, even if they don’t speak up. Bradley advises that it’s best to be honest with them. “Start with meaningful conversations about giving gifts. Rather than lecture or apologize, have an open and honest conversation about the financial challenges this year. They don’t need details, but they do need to know they are safe and OK. Let them know that the way you share gifts is going to change. It is not uncommon nor is it a bad thing—it’s just different.”

Shefrin suggests turning a thrifty holiday into a game: “Have prizes for creative gifts, cards, or ideas. Games activate the reward systems in our brains, and the more we can do to turn those systems on, the better. Ask kids for their help, shower them with praise for cooperating, and stress the importance of working together as a family.”

Kids will notice if their friends got expensive gifts, he warns, so be ready to talk about it. “Without knocking what other kids received—it’s fine to say that it’s nice the other kids got nice gifts—just come back to the theme that this year the family project is to focus on homemade gifts that are personal and bring the family closer.”

Endnotes

  1. Board of Governors of the Federal Reserve System, Report on the Economic Well-Being of U.S. Households in 2017 (May 2018), www.federalreserve.gov/publications/files/ 2017-report-economic-well-being-us-households-201805.pdf.
  2. H. Shefrin and C. M. Nicols, “Credit card behavior, financial styles, and heuristics,” Journal of Business Research 67, no. 8 (2014): 1679–87.