You want to be practical during your holiday shopping in the coming weeks and avoid starting the new year with a pile of new debt.
But will you?
It won’t be easy, but it is possible with the right attitude, Amy Jo Lauber told me during a recent interview for today’s In the Field interview in WNY Refresh.
“I never want to encourage people not to be generous. That’s not the point,” said the owner of Lauber Financial Planning in West Seneca. “The point is to be generous with the resources you have, not the resources you don’t have.
“Ask yourself, ‘What reaction are you looking for with this purchase?’ People think they’re going to get some type of reaction from a gift. It happens occasionally and it’s a wonderful feeling – and certainly we want to give our loved ones gifts – but if it’s putting us in a precarious financial position, I’m sure our loved ones wouldn’t want to put us in that place."
Lauber talked about the rational and emotional sides of our brain and said both have to weigh in on spending. She shared several holiday spending tips, including a couple involving credit cards which she called “pretty extreme,” though effective.
“You can’t start with the rational stuff, because it’s too much like ‘You need to eat your broccoli and floss your teeth,’ which we know we should do, but there’s not enough motivation to do that. … A lot of people think that’s what financial planners do, that we’re going to wag our fingers at them: ‘You should have done this, you should have done that.’ How is that beneficial?
Start by dreaming what you can achieve at this stage of the process, Lauber advised. Come up with a plan and make a list. If you’ve set aside money, bought presents throughout the year or created some homemade gifts, good for you. If not, consider these steps next year.
Once you develop a budget, do your best to stick with it.
What about the guilt-based holiday gift giving that can result in the case of a separation or divorce?
“That’s a really, really tough situation,” Lauber said. “I have many clients struggling with that. Usually, one spouse earns more – but again, money is a poor excuse for love and acceptance. It’s a brutal thing to say, but it needs to be said. Keep it in perspective. None of us want to raise our kids to want material things.”
Yet so many of us have, I told Lauber.
“But why do we do that? That’s where my brain goes,” she said.
Lauber also gave two credit card tips that can do wonders helping you live within your budget:
- Take your last credit card statement, white out the balance, write in zero and keep it in your wallet. That way, every time you make a purchase, you are reminded of you spending goal. Then make all of your purchases in cash.
You might also consider keeping a photo along with the credit card statement, say a picture of the new house you might one day like to buy, a photo that might suggest what your kids’ weddings will be like, “or something else that evokes a reminder, ‘Hey, this is important, too,’” Lauber said. “Money’s got a lot of jobs to do. We can’t give it more jobs than the employees it has to do the work.”
- If the goal-oriented tactic isn’t enough, you can try something more drastic: freezing your credit cards – literally.
“Take the credit cards, put them in a plastic bag so the metal on the cards doesn’t get scratched, and freeze them in ice in your freezer,” Lauber suggested. “Then use only cash.
“That’s so strange in our society now, but I’m telling you it does work. When you hand over dollars, it’s painful, because that’s all you’ve got to work with. Fifty years ago, our parents didn’t go wild with credit cards. They couldn’t. Now, there’s way too many trappings to get us into trouble,” Lauber lamented. “Credit card companies know that. Stores know that. Their job is to make money, not help us to be good stewards with our money. We’ve got to take that control back ourselves.”
I also asked Lauber the following questions:
What would you say are the three most common mistakes we make when it comes to money?
People don’t take the time to dream, they don’t take the time to think things through or to plan. The problem is then they tend to be reactive, rather than proactive, and they’re constantly at the whims of their emotions. … If that’s what’s steering the ship, you’re going to end up wandering and squandering, because you don’t know where you’re going.
What are the top tips you provide, generally, for people to build a nest egg and to be as financially prepared as possible for the things that might not go their way?
It’s knowing yourself and being brutally honest: What do you want out of life and what’s really important to you? Everybody defines it slightly differently. It’s usually some version of faith, family and friends. If that’s really your values, you’d better be spending your money that way, too. If there’s any conflict, we have to figure out what’s really driving that. Sometimes people spend their money to impress others, keep up with the Joneses. Maybe they want to be honored, be admired. These are insatiable appetites.
Focusing on what is really, really important to you, you have to spend the time to really make it a priority. Be creative, be resourceful. Live the good life, as defined by you. To be really practical, set aside a certain amount per month, whether it be a dollar amount or percentage; automatically if you have a (direct deposit) paycheck. It’s harder to do if you’re self-employed. It can be done, but it’s significantly harder. First you save toward emergency expenses, then toward goals.
Get more spending advice on Lauber's blog, amyjolauber.wordpress.com.