Spending Wisely During The Holidays

 

I.                     The Holidays Are Here

Around the world the holiday season is a festive time and a period of heightened spending, with The Bahamas being no exception. Moreover, for many businesses, the October through December months can account for the majority of their sales. At the same time, for households, this period can place pressure on budgets, especially when spending is unplanned or heavily credit based.

This explainer details why spending often rises during the holiday season, identifies common pressure points, and offers some practical ways that individuals can enjoy the festivities while protecting their financial wellbeing. 

II.                   What is “Holiday Spending?”

Think of “holiday spending” as the additional expenses that people devote to gifts and decorations, food and entertaining guests, personal travel and entertainment, and charitable giving, during the Thanksgiving, Christmas and New Year period. These seasonal purchases help support retailers and other businesses, stimulating overall economic activity. However, concentrated spending over a short period can put pressure on household budgets if it is not carefully planned for in advance. Some common pressure points may include: unplanned purchases driven by sales and promotions; trying to live up to societal expectations; and last-minute shopping which can limit choices and potentially increase reliance on credit.

In this context, the Central Bank invites you to be MONEY SMART when it comes to holiday spending with the following tools.

III.                 Develop A Holiday Budget

Creating a budget for the holiday season can help align expectations with resources. The following steps can be taken:

1.       Estimate your total income for the holiday season: Monitor your regular wages and salary, bonuses, and seasonal or part-time work.

2.       List recurring expenses first: Before allocating funds towards holiday-specific items, prioritise:

a.       Rent or mortgage payments

b.       Utilities bills

c.        Loan and credit card repayments

d.       Transportation costs

e.       Household grocery

f.         Other recurring obligations (like school fees)

Taking care of these expenses ensures that the new year does not begin with overdue bills.

3.       Set up a realistic “holiday spend limit”:  After dealing with essentials, decide how much can be safely spent during the holidays on items like:

a.       Gifts

b.       Specialty food and entertaining

c.        Decorations and or home upgrades

d.       Entertainment

4.       Track your spending: Regularly review cash transactions, card or digital wallet statements during the holiday season to adjust plans before issues arise.

IV.  Use Credit Responsibly

Credit is a part of everyday life. When used responsibly, it can support convenience and planning during the holidays. However, if used without a clear strategy, it can lead to financial stress. Consider the following suggestions:

  • Know the full cost: Before using a credit card, or other loan facilities (such as personal loans or payday borrowing), try to get an understanding of the full picture upfront: interest rates, fees, minimum payment monthly requirements, and early repayment penalties, if any.

  • Avoid using debt to fill budget gaps: If holiday-related expenses exceed your preset spending limit, it may be better to revise your shopping list rather than borrowing to cover the difference.

  • Plan for repayment: For any holiday-related borrowing, set a target date for repayment and incorporate this into next year’s budget

       V.  Practical Tips for Households

To support comfort and stability during the holidays, households can:

  • Prioritise essentials: Ensure that recurring financial obligations are covered before taking on non-essential purchases.

  • Set clear limits for gifts: Agreeing in advance on a set price for gift exchanges can help manage expectations and budgeting.

  • Comparison shop: Compare the prices of items and consider if they are necessary or will have lasting value beyond the holiday season.

  • Plan for next year’s holiday season: Reviewing what worked well can allow for proactive money management for next year’s holiday season.

       VI.  Embracing Financial Literacy

The key to avoiding holiday-related financial stress is by embracing financial literacy – the set of skills needed to handle money wisely, invest efficiently, and plan for a comfortable future. The Central Bank’s Get Money Smart Bahamas campaign emphasises that financial literacy empowers persons to manage debt, save and invest wisely and make well-informed decisions. Specifically, it provides resources focused on various topics like budgeting, mortgages, cyber-security and debt management. By practicing financial literacy, Bahamians can navigate the short-term holiday spending pressures confidently, and build long-term habits for financial stability.

Additional Resources on Get Money Smart Bahamas

i)                     Official Website: https://www.getmoneysmartbahamas.com/

ii)                   Facebook: https://www.facebook.com/getmoneysmart242/

iii)                  Instagram: https://www.instagram.com/getmoneysmart242/ 

Disclaimer

This explainer is provided for general information purposes. Individuals should also consider their own circumstances and, where appropriate, get professional advice.

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