Holiday money-saving strategies that can backfire
Holiday marketers have your number, and they know how to entice you to spend.
You try to rein it in. But two favorite strategies can lead to spending more, according to a 2018 survey by the Center for the New Middle Class, a research organization funded by Elevate, which lends to credit-challenged borrowers. Consumers who shopped at sales were 50% more likely to say they spent more than they expected. Among shoppers who used coupons, 38.5% said they overspent.
Many shoppers try to be careful instead of making a spending plan. Using a budget can feel like it's wringing the joy out of a happy season. Why? Giving feels good, says Jeff Kreisler, co-author of "Dollars and Sense: How We Misthink Money and How to Spend Smarter."
But simply being careful doesn't work, "because a lot of the reasons we make poor financial decisions are unconscious," says Kreisler, who's editor-in-chief of PeopleScience.com, which applies behavioral science to the marketplace.
However, you can position yourself to recognize -- and overcome -- overspending triggers.
USE THE BEST DEFENSE: A HOLIDAY BUDGET
Ashley Feinstein Gerstley, a financial coach and founder of the Fiscal Femme website, advises setting aside time -- not over an hour -- to list holiday expenses. Build in a buffer, because you'll forget some things. But you'll be better off if you have a number in mind, she says.
Be realistic, not rigid, about your budget. Otherwise, controlling expenses can seem so futile you don't bother trying, she says. "It's like being on a strict diet and figuring if you cheated and had a cookie, you may as well eat the whole bag."
If you worry about overspending, consider getting a prepaid gift card in that amount, Kreisler says. It can help you stay aware of what you are spending and what's left.
Having a successful holiday spending plan may also inspire you to create a budget to help you achieve financial goals throughout the year.
UNDERSTAND HOW SALES CAN COST YOU
Shopping sales can be smart -- but only if you're strategic and aware of the psychology at play. Kreisler says if you see a $100 cashmere sweater marked down to $40, your brain registers "saving $60." Train yourself to translate that to "spending $40" and compare how it fits into your spending plan.
Then, figure out how much the sweater is worth to you. Would you still want it if $40 was the regular price? It's the same sweater and the same money but minus the rush of feeling that you got a deal.
Watch out for impulse purchases, too. Gerstley says she's encountered products she never knew existed while shopping (think cell phone sanitizer or weighted blanket) and suddenly wanted them. Badly. She's a fan of "the 48-hour rule": Put the item back on the shelf or abandon your virtual cart, and if you still want it 48 hours later, go ahead and buy it. Often you won't, she says.
Understand that marketers use one-day sales or even shorter buying windows to create urgency. Fear of missing out can lead to poor decisions; buy only the items you intended to anyway.
KNOW THE TROUBLE WITH COUPONS
Coupons can save you money -- or tempt you to upgrade because of your "savings."
Kreisler says a coupon is great if you've been waiting for a discount to buy something specific on your list. If you've done your research and buy the item you intended to, using a coupon to drop the price, then you really are saving.
As with sales, it's important to focus on your spending, not your "savings." If you have a coupon for $10 off a $50 purchase or $30 off a $100 purchase, would you spend more to "save" more? Stick with what you intended to spend.
KEEP THESE TIPS IN MIND AS YOU SHOP
Kreisler offers these additional tips for spending less:
-- Imagine how the holidays would be different if you spent a little less on a particular gift. Would it really detract from the joy?
-- If you cannot afford to reciprocate with a gift of equal monetary value, consider giving something else of value, such as offering an evening of child care or creating a painting. Write a note about why you chose the gift especially for the recipient.
-- If you want to trim your gift list, discuss it with friends and family shortly after the holidays, when warm feelings abound. Announcing it late in the year isn't a great idea.
This article was provided to The Associated Press by the personal finance website NerdWallet. Bev O'Shea is a writer at NerdWallet. Email: email@example.com. Twitter: @Beverly_OShea.