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How to Financially Prep for the 2021 Holiday Season

Jean Chatzky  |  November 23, 2021

From shopping tips to managing debt, here is your financial guide to the 2021 holiday season.

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This Week In Your Wallet: The Shopping Issue (Or Not)

I should have anticipated the flurry of sales emails that hit my inbox yesterday morning: 25% off everything at Jenni Kayne, 25% everything at Rag & Bone, 25% off everything at Lulu & Georgia.  I could go on. (Brochu Walker – I’m waiting for you!) After so many retailers telegraphed that the sales weren’t coming, here come the sales.  

Despite deals that are less than we have typically come to expect come at holiday time (more on that in a moment), retailers are, as Forbes puts it, clearly “egging shoppers on.”  And perhaps as a result of that (or fears that some gifts won’t arrive on time), the overbuying is on. One in five shoppers acknowledges purchasing extra items “just in case,” fully intending to return them. That combined with inflation is enough to set shoppers like us (not to mention retailers who have to contend with restocking the shelves) up for some disappointment. Here, in no particular order, are some of the things I think you should know.

All I Want For Christmas Is…An Actual Deal

It’s not just shrinkflation – that habit of manufacturers of putting your breakfast cereal or your cookies or whatever – into a smaller package but maintaining the price that’s eating into your budget this holiday season.  Rice University Professor of Marketing, Utpal Dholakia, laid out a handful of ways you’re paying more for less. Among them, unbundling. We’ve seen this with travel. Seat prices stay approximately the same, but you pay separately for baggage, meals and snacks. And that’s not all. Seats have gotten smaller and frequent flyer miles have been devalued as well. Similar things are going on in other industries – with fashion companies making their goods with less expensive materials, and loyalty programs giving you less for more.

A section of the story devoted to membership programs and how the membership fee itself needs to be factored into the price you pay for goods (something many consumers fail to do) was illuminating. It also encouraged taking another look at unit prices which are not always what they seem. I was in a grocery store over the weekend where 12 oz. bags of my favorite Starbucks coffee (yes, we brew at home – who did you think you were reading?) were on sale, but the 18 oz. were not. Before reaching reflexively for the bigger buy, I checked – and in this case, the smaller ones were the way to go.

Debt The Halls With…

A recent Federal Reserve report noted that consumer debt hit an all-time high in the third quarter of 2021. Now, most of that increase can be attributed to mortgage debt. But as Michelle Singletary of The Washington Post points out, “it’s beginning to look like a great Christmas – for credit card lenders.” She cites a CreditCards.com poll that says 60% of people with credit card debt expect to add to it this holiday season. If you’re feeling stretched, I’d suggest following her lead: Go with Secret Santa gift exchanges instead of allowing your recipient list to overwhelm you. Decide with friends that the celebration can be the gift. And when it comes to little kids who really don’t know better (and maybe others, too) regift with aplomb. Singletary is proud that her regifting exploits have become the stuff of legend. I’m with her. And so are – I suspect – the millions of members of the Buy Nothing groups that have taken hold, as US News reports, in 44 countries with more than 6,500 communities.

I Had A Little ‘Flation

Of course, there are other things to pay attention to this week. The always excellent John Wasik weighed in on how to stop inflation from taking a bite out of your retirement. Although the fact that Social Security checks will go up 5.9% — the highest cost of living adjustment in 40 years — garnered a lot of headlines, Wasik points out that other increases will quickly evaporate those spoils. For instance: Medicare Part B premiums are rising 14.5% — the standard monthly premium will jump from $148.50 to $170.10. That’s a difference of $259 a year.  Double that for a couple. 

So, besides strategizing to maximize your take from Social Security, what’s the solution? Wasik suggests estimating how much you’ll spend on Medicare premiums and trying to sock some money into Health Savings Accounts, which can then be invested for growth and withdrawn tax-free for many (if not most) health-related expenses, making sure any long-term care insurance has a cost of living rider, and working with a financial advisor if you’re not sure you’re on the right track. If you need one, we can hook you up with a fiduciary advisor who lines up with your needs – here.

Fa-la-la-la-la-la-la-la-la

Fa-fa-fa-finally, it’s never too early to – as our favorite snowman Olaf might say – give your finances a big warm hug so you’re in the best possible shape to kick off (can you believe it!) 2022. Here’s the skinny.

Have a very, very Happy Thanksgiving!

Jean

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