How many times have you gone through a self-loathing session after realizing how much you spent on a night out?
Buckle up! You’re about to experience many more of those before the year ends. What’s worse, those feelings might compound to self-hate in January: when you’ll realize that you have either zero in your account or are in debt! Too harsh? Sorry, I’m just stating facts…about how other people behave during the holiday season.
That won’t happen to you. How can it when you’re a member of The Wealth Tribe? You’ll prepare your finances for the holidays by reading this article and taking action as we always do.
The sales season began in November. You’ve noticed that retailers are ready with multi-pronged sensory campaigns to get you and your money parted.
To avoid overspending during this holiday season and having to deal with buyer’s remorse in January, here’s how to prepare your finances for the holidays:
1. Be aware of the sales campaigns
Holiday sales can represent up to 20% of annual revenue for most retailers. While you cannot completely eliminate the influence of environmental cues designed to get you buying, be aware that your sudden itch to buy the stuff you don’t need is scientifically designed.
How will retailers play with your senses this season?
Red, being the dominant colour of the season, gets your blood boiling. It stimulates and energizes you and your spending power. Studies show that using red on online platforms such as eBay leads to higher, aggressive bids.
This season, there’s always something in the air.
Scent marketing is an art and a science where retailers use certain kinds of smells to inspire you to spend more. It can be aggressive, where the scent makes you walk into the shop (like I always do when I pass by a home-decorating store!) or subtle, where you don’t even realize that it’s intentional to get you buying.
Retailers use scents to enhance our perception of their brands and products.
It’s not an accident that the first thing you notice when you walk into a movie theatre is the smell of popcorn. Theatres make more money from popcorn(and other snacks) than from tickets.
5 mins into watching ‘The Harder They Fall’ on Netflix and you realize how big a role soundtracks play in setting the mood and intensifying your emotions.
Christmas carols get us into the holiday spirit which also doubles as the spending spirit.
All the ads on billboards, your phone screen, TV and those carefully crafted by your favourite influencers are supposed to make you feel anxious, competitive and pressured to buy now so you don’t miss out!
Consumer research shows that holding an item in a store increases feelings of attachment, which increases your likelihood of buying. Retailers design store displays tactfully to make sure that you touch as many items as possible.
Being aware of such marketing tactics can help you avoid purchases that are not a need during this holiday season.
2. Pay yourself first, invest before you spend
Before you get caught up in the holiday festivities and wild spending sprees, do something that your future self will thank you for.
The old Warren Buffet habit “Do not save what is left after spending; instead, spend what is left after saving” should be the default financial setting this season.
Saving and investing before spending improves your self-esteem. You walk more confidently and sleep better knowing that you have some security.
One way you can invest in yourself is by adopting good money habits as soon as today so that when the new year comes, you’ll start off better than you ever did!
Put some action to your #NewYearNewYou resolutions by investing in a copy of this e-book: 14 Habits That Will Make You Wealthy.
Everyone wants to be rich. Everyone wants to be a millionaire. What separates the winners from the losers is their habits.
3. Set up a holiday budget
How much money do you intend to spend during this season?
What activities do you intend to take part in and how much do they cost?
What do you want to buy?
Make a list and include the figures so that what you intend to spend money on doesn’t exceed how much you have.
Come up with a realistic amount that ensures you don’t overspend and end up in debt.
A good hack would be to keep the money you intend to spend during this season in a separate account. This way, you’ll know when you’re running low and you can make spending adjustments.
4. Track your holiday expenses
Creating a holiday budget using the 3 pointers above is useless if you don’t track how much you’ll spend.
You can make this season (and the seasons after) the best yet if you prepare and track all your expenses.
By tracking all your holiday expenses, you’ll have the data you need to estimate how much you’ll need for the same season next year and the years after.
5. Keep a list of things you plan to buy so that you can prioritize
Banks and other companies know that people are ready to spend so they’re providing all these incentives e.g 0% interest, cashback on credit cards etc. These compel you to take on debt and spend loads.
The goal is to outsmart them by having a spending plan: have a list and stick to it.
Social media algorithms will also play a major role in determining what you spend on because Google is always listening. You’ll be bombarded with more and more ads that are in line with what you search especially if you’ll be shopping for gifts for your loved ones.
Think about who you’ll gift. Consider that some people don’t want any gifts, and some minimalists are very particular about what they want. It’s better to ask than fill their lives with clutter.
Remember: you don’t have to feel obligated to buy gifts, especially for everyone. Communicate to your loved ones: those that are open to having conversations about money. Don’t undo all the good work you’ve done with your money all year.
Plus, appreciation doesn’t need to be in the form of objects. You can give in other ways such as helping with chores, running errands and babysitting.
6. Delay your purchases
Some retailers don’t change the prices of their products. All they do is replace the old price with a new red SALE sticker because they know that’s all it takes to get you buying!
Delaying a purchase will help you determine if it’s a need, want or just another thing you’re buying because you feel sad.
You can delay the purchase by doing a price comparison from various shops. You owe it to yourself to get the best deal!
Smart people know that the best deals are found just before Christmas or after Christmas as retailers are usually rushing to clear their stock.
7. Keep away the money you’ll need in January
I don’t think there’s a worse feeling than finding yourself in a situation where you’re unable to pay basic bills in January after going all out this season!
Be kind to yourself by keeping the money you’ll need for basic expenses, school fees etc in a separate account such as a Money Market Fund.
You want to start the year feeling and knowing that you’re in control.
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