The holidays are ripe with family and friend gatherings that bring us tidings of joy — but also serious panic when our credit card bill appears in January. All those mega deals we found are exciting — and for some, addicting. “Holiday shopping is a treasure hunt that can provide a potentially false sense of satisfaction,” says Paris Davis, the senior vice president of Northwest Arizona Retail Division at WaFd Bank.
Major sales on Black Friday, Small Business Saturday, Cyber Monday (and the list goes on) may tempt us to buy unnecessary goods. The antidote?: Take a time out before filling your shopping cart to gain a little holiday spending perspective. Here are five questions to guide you:
Do I really need this — or do I want it?
It’s the question our parents asked us when we begged for toys — and the one we pose to our own kiddos today. But turning the tables around and identifying our own want vs. need impulses is difficult.
The key is to be honest and practical rather than reactive when you see a sale, says Janenne Lackey, a Certified Financial Planner and Chief Compliance Officer of Wilde Wealth. “Don’t get caught up in saving money, just to save money,” she says. “Before any purchase, you should really sit back and think why you need it. Have you have ‘needed’ it for a while and lived just fine without it? If so, you probably are fine without it.”
Another holiday season need/want trap is separating immediate necessities from future ones. One example is major appliances, Lackey says. This time of year big-box stores usually have major appliance sales, and if you have one that eventually needs to be replaced, it’s tempting to buy now rather than later.
It’s an effective practice if you know without a shadow of a doubt that your fridge or washer-dryer combo is on its last leg. But what if your old appliance actually works for another year before it dies? “You just spent money to replace something in advance because it was on sale,” Lackey says, So even though you saved money on the purchase, you made a purchase that could have been put off for another year. (Got other costly items on your shopping list? Here are the best times to buy big-ticket items.)
Would I get this if the price tag didn’t end with a nine?
Beware of the mysterious power of the number “9.” Without realizing it, we could fall victim to this common bit of retail pricing trickery.
In an experiment by the University of Chicago and the Massachusetts Institute of Technology, customers were given the chance to buy an item priced at $34 or $39. People were more likely to purchase the $39 item, even though it was more expensive. Crazy, right? The reason is that most people associate “9” with savings, which prompts them to act fast, since most of the time, discounts are limited.
A related question is to ask yourself: Would I buy this if it wasn’t on sale? “Sales work because we want to win and get a great deal,” says author and founder of The Fiscal Femme, Ashley Feinstein Gerstley. “We tell ourselves we’re saving money. We say things like, ‘I wasn’t planning on buying anything but this was 40% off’ or ‘But it was only $60!’” But if you weren’t going to buy the item anyway, scoring “a deal” for $60 isn’t saving money at all. It’s spending $60 you weren’t planning to part with.
Will this purchase bring me joy and happiness — now and tomorrow?
We’ve all been there: We find 10 garments on sale, try them all on … and they all look amazing. We want all of the above, plus the accessories that go with them! In the heat of the moment we feel great about our purchases, but days later after the outfits are tucked away in closets and dresser drawers, can you even remember every item that you bought?
Davis challenges shoppers to consider how much happiness a sale will bring us beyond the moment. It’s especially good to consider what your loved ones will truly appreciate when you’re browsing for gifts for friends and family. While gifts, of course, can be thoughtful, they may not be worth the expense if they aren’t useful or joy-inducing. “We generally do not remember a particular gift that was received in years past; however, we will always remember the warmth of the holidays,” Davis says. Instead, spend your energy — and your money — on items and experiences that make long-lasting memories you’ll enjoy for years to come. (How about a sweet handmade card?)
If I had to get off the couch to buy this, would I?
Upside: Online shopping is a great tactic for overworked professionals who have little time to scour the grocery store shelves or commute to the only Sephora or Target in town. Downside: The internet can make us lazy about budgets, according to Lackey. After all, when we can simultaneously binge watch a show on Netflix, roast dinner in the oven, text our friends and double-click to purchase a half-off pair of jeans with Apple Pay, it’s all too, well, easy.
“As you are sitting on your couch, try and think in a different way,” Lackey says. “If you had to get up, get dressed and drive to the store to buy this, would you?” If the answer is no — that it’s not worth the drive and the inconvenience of buying it IRL — remove it from your virtual shopping cart. (Try these HerMoney tips to put some healthy distance between you and those tempting shopping apps.)
Do I know how I’ll pay for this?
Our first inclination to this query may be “Well, obviously.” But take a step back and ask: Right this very moment do you have the funds in your bank account to buy this item and pay for it in full? Or will it be necessary to put it on a credit card so you can pay for it later on when you have the cash in your checking account?
Fiscal Femme’s Gerstley says understanding exactly how we will handle a purchase sets us up for financial success, rather than burden. As she explains, one of the ways we get in trouble during Black Friday, Small Business Saturday or Cyber Monday sales is in making purchases we didn’t plan for. “We end up taking money from savings or putting purchases on our credit cards that we have to deal with later. Going through the exercise of putting together a budget or using a spreadsheet for budgeting helps us decide if we have the money available to spend,” she shares.
The Black Friday bottom line is …
Before you step into the wild, wild west of holiday deals, prepare for the impulses that may come by preparing a holiday budget. (Here’s how!) “Make sure you have a clear idea of whom you’re buying for, and what this person may like to receive from you. Otherwise, you are not only running the risk of overspending — you are also likely to get them something less than meaningful,” Gerstley says.“ It’ll also help you avoid ringing up a mile-long credit card bill that will leave you with a Black Friday hangover. And remember, just because something’s on sale doesn’t mean it’s a great gift — or even a “deal.”
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