Creating a Holiday Spending Plan that Doesn’t Derail Your Retirement Savings Goals

By Michael Hollis

We can tend to let the holidays sneak up on us and take for granted how much we usually spend on the traditions and activities that make this time of the year special for us and our families. When we get into January, we may be appalled at what we spent but think, “It was worth it” because of all the lasting memories and the excited looks our family members (especially young children) had. But there still might be that twinge of regret because we know we could have been more disciplined. This regret, especially revisited year after year, could derail your bigger retirement savings goals.

What are the stumbling blocks?

Let’s be real for a minute. Many of us feel pressure to perform during this time of the year. We don’t want to look like a Scrooge (I’m suspect of that, Ha!) or let people down. We want to communicate our love and appreciation for those in our lives. We can feel the impulse to impress with a gift for another exchange, provide a lavish meal, and generate magical experiences to meet these expectations, and the pressure can be conflicting. It can feel tricky to say no to family and work gift exchanges. Thinking we will be judged or seen as stingy can lead us to give in even though we don’t have the margin for all the festivities. This is the “Fear of What Others Think” stumbling block.

It’s true, too, that the season is filled with unique events, parties, and activities that seem too good to pass up and won’t come around again for another twelve months. Maybe it’s your favorite thing to do, and “everyone will be there.” It could be a trip your friends want to take to ski out west that’s never happened before, and you’re pretty sure this is a “once-in-a-lifetime” opportunity. This stumbling block is called “F.O.M.O,” or fear of missing out.

Finally, the holiday season often amplifies materialistic desires. The desire for the latest gadgets, trendy clothing, or extravagant decorations can drive overspending as you chase the ideal holiday experience. I mean. How can I pass up Black Friday, Cyber Monday, and all the promotions and sales on what I want for ME?! Don’t I want the house to be magical for the kids and grandkids, with twinkle lights, poinsettias in every room, and the blow-up Frosty the Snowman on the front lawn? “I want what I want when I want it, and I don’t care what that means for tomorrow” is the mantra of blowing up our savings plan, and companies are throwing the kitchen sink of marketing techniques at us to egg us on.

Reframe the Time

All of this is dizzying me. We can return to solid ground by returning to solid values and recalling our goals. 

Instead of focusing on the stumbling blocks, shift your attention back to what matters – connections and contentment. The holidays are about nurturing relationships and recalling our blessings. Lasting memories will be the natural byproduct of deeply connecting with people. Spend time listening to their story, asking exploring questions, and checking that they know they were heard. You can do that no matter what venue you find yourself in. Contentment comes by being grateful for who is in our lives, the events that have occurred, and what we have. Highlighting these values is more meaningful than all the gifts we can give, decorations we can hang, or the perfect cuisine we can make. 

Further, having our goals in front of us can keep us on track because we know the opportunity cost of each decision. It’s good to get those overarching goals “on paper” with an action plan for how you will get there. Since this article is supposed to be about keeping your retirement savings on track, let’s hit that objective specifically. At The Dala Group, this is as much our specialty as it was Obi-Wan’s to take down Sith lords. 

Two avenues to hit your retirement savings goal could be to have a nice juicy 401k and a fully paid-for house. You might have committed to saving a specific percent of your income into your 401k and had enough above your other living expenses to throw a decent chunk each month to pay down your mortgage more quickly. What if, year after year, though, competing interests, such as pleasing others, F.O.M.O., and sparkling new electronic devices, erode your pursuit? You have permission to stick to your retirement goals rather than go beyond what you can afford over the holidays. And it’s a false choice to believe connections, contentment, and meaningfulness can’t occur without overspending and extravagance.

Staying on Track

So, you might be thinking, “I wish I would have considered this ten months ago.” That’s fair and, to be honest, a much better practice. So, I want to talk about what you can do in January, but I also want you to have a plan for this year.

For this year, here are the practical steps.

1. Get a game plan together today for this year. It’s not too late. Don’t wait. Even if you’re reading this during the holiday season, it’s not too late to get your spending under control.

2. Take an honest look by reviewing your current financial situation. Understand how much you can spend without jeopardizing your medium and long-term financial goals. Do this while leaving any automatic savings into your 401k or bank accounts unchanged and your debt and loan repayments going strong.

3. Decide on a number and set a budget. Be realistic. Find experiences you can share that don’t cost a lot, like a pack of group question cards that can create comedy and genuine getting-to-know-you opportunities. Eat in instead of eating out.

4. Sacrifice something you were planning for something you want more during the holidays. Don’t attend one or more of the available events to attend the one you really don’t want to miss. Drive instead of fly. Stay with family instead of in a hotel. It might be more cramped, but you’ll save and build memories. Cancel that all-you-can-watch cable package or streaming plan, or reduce that top-tier internet speed.

5. Stick to it. Make a pact with yourself and your spouse to stick to the number you’ve set together, no matter how tempting it may be to overspend. Use cash because you’re more likely to overspend using credit cards, and you can’t spend cash you don’t have.

6. Communicate. Honesty is crucial. If friends or family invite you to events or suggest gift exchanges, communicate your constraints. It may be uncomfortable, but it’s essential. You can say, “We would love to do this, but we have to pass this year,” or “We’d love to participate, but this is all we can afford because we are focusing on a goal.” Being open about your financial limitations can be difficult, but remember that true friends and loving family will understand and support your financial goals. Vulnerability can lead to deeper, more authentic connections.

So, what about the best practice I mentioned? Start planning in January next year. It’s never too early to start planning for the next holiday season, so set a calendar reminder to sit down and review the expenses from this year. Many holiday expenses are predictable, and they happen about the same time every year. So, take the total expenses, divide by twelve, and open a savings account you contribute to throughout the year in regular amounts. Keep it simple. This spreads the financial burden and reduces the temptation to overspend next year because you have all that cash on hand and can freely spend, participate, and bless others.

Holiday spending doesn’t have to derail your retirement savings. You can avoid the pitfalls I mentioned by returning to your values and goals. By focusing on what truly matters, setting clear financial objectives, and communicating honestly with loved ones, you can enjoy the holiday season without sacrificing your long-term financial security. We’d love to partner with you on your journey towards your goals. Contact us today to start getting on track or find the companion you need to stay on track.