Stay Financially Stable For The Holidays

As the parang soca goes, it’s Christmas! Merry Christmas!

In the US, Thanksgiving has come and gone. And all over the world, including Trinidad and Tobago, Black Friday sales extend to a week or more of deals. Internationally and locally, December spending can easily double normal monthly spend. If a family of four usually spends TT$1500 at the supermarket, at Christmas time, bills of $3000 and more would not be out of place.

And although the Covid-19 pandemic has certainly slowed consumer spending, by all anecdotal accounts, our national holiday spending habits may be very difficult to break. In fact, the restrictions that we have endured in the name of safety may drive a general sentiment of needing to “free up” for the holiday season.

We all know someone who is convinced that Christmas can’t be Christmas without copious amounts of ham, turkey, alcohol, new home furnishings and toys for the children. And they are willing to spend beyond their means to capture that feeling of general goodwill and satisfaction that comes with this time of year, perhaps even more so now, in order to counter the mental anxiety we are all facing.

However, the global pandemic and the subsequent lockdowns mean that our economy —and consumer disposable income — will remain at lower than normal for the duration of the pandemic and most likely for years after it. While the Central Bank indicates that consumer spending has dropped over 2019 into 2020, from highs in 2018, credit card loan debt has steadily increased from just under TT$2.5 billion in 2015 to TT$3.5 billion in 2020. In March 2020, the country recorded over TT$24 billion in outstanding commercial bank mortgages from $22 billion in the previous year. So debt is already high. Add to this the job losses and business closures from lockdowns earlier in 2020, and it becomes clear that T&T’s families will start a new year at a significant financial deficit.

In light of these facts, it is even more important that families do not try to recreate the Christmas spirit through spending. This year, more than ever, is the time to focus on the true meaning of the season: spending time with loved ones, being a joyful giver and peace to all, not worry about how bills will be paid come 2021. Here are some tips to ensure your family’s financial stability through the Christmas season into the new year.

Set A Budget And Stick To It
Whether you use an Excel sheet or an app, carefully budget your November and December income and resist the urge to splurge. Set limits for the expenses that can easily get out of hand, like groceries or gifts, and don’t go over, no matter how many great new products are on display. One way to do this is to leave your credit card at home, and only debit from your account the exact amount of cash that you plan to spend for any purchase.

Ignore Status Symbols
Many of our Christmas traditions, although harmless, involve spending money where it isn’t necessary. Good quality curtains should last up to three years; furniture and appliances can last up to three or four times as long. If you purchased new soft furnishings and a living room set a year ago, there’s no real need to purchase new, unless something is soiled or broken beyond repair. Invest in a good cleaning rather than new items; everything can look like new for a fraction of the cost.

Reduce Gift-Giving
Try not to focus on the number, but rather the quality of gifts that you exchange this year. Small children cannot tell the difference between a $300 toy and the box that it came in, in terms of the items’ playtime value. So resist the urge to charge several hundred dollars worth of toys to your credit card for a two-year old. Older children can be content with one good gift, rather than a host of presents that will lie on their bedroom floors on Boxing Day. Give handmade items to loved ones not in your immediate family. A batch of delicious brownies would communicate your appreciation to friends just as much as a bottle of expensive wine would.

Save & Invest … Really!
Even in this guava season, give yourself the gift of increasing financial peace, knowing that you are putting some of your income away for your family’s future good.

If you are lucky enough to get a bonus this year, now might be a good time to think about an investment instrument like annuities or mutual funds that can securely accumulate funds and allow them to earn money for you, no matter how the job market fluctuates.

You can even take the opportunity to teach your children the value of money. Allow them to earn money doing seasonal chores for the home and for extended family, and introduce them to the idea of saving through a RightStart account. Imagine how proud and grown up a ten-year-old will feel when Daddy announces that they are now old enough to start their own bank account and get their own statements where they can watch their savings grow. What a great Christmas lesson!