Are you spending or saving this holiday season?
It was estimated that Americans would spend around US$1 billion on turkeys this year for Thanksgiving –equivalent to around 293 million Americans enjoying around 46 million turkeys. It, therefore, comes as no surprise that although it is a holiday that is only celebrated in the United States, Canada, Grenada, Saint Lucia and Liberia, most people around the world associate Thanksgiving with turkey. The holiday however has a much deeper meaning and an even richer history. It dates back to 1620 when 102 passengers embarked on a journey from England to Massachusetts seeking a new village where they could more freely practice their faith. Their three-month journey began in September, with only half of the colonists surviving the winter aboard their small boat. They moved to shore in the spring and purportedly met Squanto, a First Nations American and previous slave of earlier British explorers, who taught them how to cultivate corn, catch fish, and avoid poisonous plants. In honour of the first successful corn harvest in November 1621, the Pilgrims organised a celebratory feast for the First Nations Americans to show their gratitude. Little did they know that this was going to mark the first of many Thanksgiving feasts.
The Thanksgiving holiday is unique in that it is not focused on gift giving or decorations, but rather on togetherness and being thankful for friends and family. The shift of focus toward gratitude has great impacts on our mental health – being thankful activates the brain’s reward pathways and produces dopamine, our natural feel good emotion. When a series of long-distance seasoned runners were asked for tips to keep motivated through longer runs, the most popular tip was the gratitude mile. The idea is to spend one mile thinking about the things you are thankful for. This will help shift your mindset and give you a mental boost and a distraction from the monotonous act of running. This feeling of gratitude can help motivate us to keep moving forward, and can be applied to any aspect of our lives; our relationships, our careers, our health, and of course, our finances.
The act of gratefulness requires us to focus on what we have rather than what we don’t. Being grateful has been shown to reduce the feeling of impatience, making it easier to say no to instant gratification and the temptation to spend frugally. As I explained in a previous article, instant gratification is the temptation to do something now for immediate satisfaction without having to wait for it. Credit cards fuel this temptation as they allow you to spend money you don’t even have. This can very quickly lead to unhealthy spending habits, especially during the holiday season.
The holiday season, in contrast to Thanksgiving, is synonymous with decorations, exchanging gifts and parties. This can very easily rack up quite a bill, making it hard to maintain the good financial habits we developed throughout the year. The start of the holiday season is therefore a good time to check in on your personal finances and make a plan to help avoid spending traps and bad spending habits.
Keeping track of our spending serves as a good reality check – it allows us to realise where we are spending unnecessarily and helps in saving money. Statistics show that Christmas is the most expensive holiday of the year – the average cost of Christmas shopping in the United States was almost US$1,000 per person in 2021. Spending more means saving less, which can create difficult situations in the event of emergency expenses. Here are four ways to control this:
Fix an amount that you want to put away each month and stick to it, regardless of the season, and treat it like a monthly bill that needs to be paid.
Make a list of all the gifts and expenses you expect to have this season and assign money for each purpose. If you don’t know where you are spending your money, it is difficult to control your spending.
If you manage to spend less than you budgeted for on a gift, put that extra money into a savings account and pretend that you spent it, no matter how small the savings are.
Finally, avoid using money you don’t have to fund these expenses. The concept of buy now pay later (BNPL) has become a popular e-commerce method of payment. This allows you to divide your purchase into several smaller payments to be settled in the future. Although convenient and generally low cost to use unless you miss a payment, it can create the illusion that you are spending less than you actually are, and that you have more money to spend. Rather than buying now and paying later, try saving now and buying later. Just as the Pilgrims taught us, there are other ways to show your appreciation towards a loved one that does not require bending over backwards financially.
Our two cents: Santa was onto something when he made a list and checked it twice – write down your expected expenses and stick to them. Maintaining discipline and a strict budget during the holiday season is essential to make sure you are not overspending and creating unnecessary financial stress. This is the season to be jolly, the season of giving, and not the season of stressing and spending. If you need help setting up a budget, speak to us at Black Swan Capital and we can help you organise your finances.
