We sat with financial expert Andrés Gutiérrez to find out how to avoid the debt hangover that usually Holiday gift-giving without the debtfollows the holiday gift-giving season.
Once Thanksgiving is over, we start hearing a familiar question: "Are you ready for the holidays?" Often times we're not even done eating our turkey before heading straight for the Black Friday sales. In the US, preparing for the season has little to do with putting up a tree or baking cookies; it's all about the gifts. Are you done with your holiday shopping? is the real question.
Unfortunately, when it comes to exchanging gifts, the tendency in most families-especially Latin families-- is to blindly buy gifts without knowing exactly how much money we have available to spend. A prevailing attitude of "we're not going to worry about money now", results in a new year's worth of financial hangovers. According to financial expert Andrés Gutiérrez, Latinos usually fall prey to the familia's peer pressure of giving presents to everyone due to compromiso (or obligations). Our wish list keeps getting bigger and bigger, and we just don't know how to say no.
Instead, many take out credit cards or get last minute, high-interest loans just to save face and look like veritable Papá Noels: the kids get more toys than they could ever play with, grandma gets fancy jewelry, and each one of your 48 primos (or cousins) gets a little something. And when the bills arrive in January, the reality of the debt hits hard. No doubt there's a need for a holiday gift plan.
Holidays without debt, now!
So, how do we get to the other side of the holidays without carrying over mounds of debt? Gutiérrez offers some solutions to stop the gift-giving madness this year:
1. Make a Holiday budget: Take pen and paper, and write down who is getting a gift, and how much money will be spent on each gift. Divide the total gift-spending amount into paydays from here until Christmas (or your celebrated holiday). Adjust your seasonal budget according to what you can realistically spend (shrink the list or the amount of money) because for this year's gifts you will…
2. Pay cash: Pull the set amount from each paycheck in cash, and take it with you when you go shopping. Leave all credit cards at home! "With cash, you can't overspend; think of it as a gift to your own family," says Gutiérrez.
3. If you can't, you can't: Know that this year not everyone will get a gift from you, because you've decided not to go into debt. "If you knew that your brother was getting into debt to get you a gift, what would you tell him?" asks Gutiérrez. The expected answer should help you make sober decisions about gift-giving this year.
4. Make up your own gift vouchers offering time and services: How about giving coupons for a night of baby-sitting, a day of closet organizing or a couple of hours of house cleaning? Think of your talents and skills, and give them as gifts to your loved ones.
Long-term planning for holiday gifts
'Tis the season for gifts…and planning? Gutiérrez advises doing some early planning for next year's holidays this December:
1. Find a category or two in your budget that you can reduce (or eliminate), and put away $50 per month in cash under a new category called "Holidays".
2. By December, you should have at least $600. Now, make your gift-giving list, and assign the amount of money you'll spend on each person. Take your cash envelope (not your credit cards!) shopping with you, and stick to your plan.
The result? Paz financiera. "The financial peace in my household is more important than making anyone else feel good about their Christmas gift," says Gutierrez, whose family follows this annual gift-giving plan with great success. "If you do this, [once you get to] the other side of Christmas, you'll be done… [and] you won't be paying Christmas 20 years from now!"