Normally at this time of year people spend money – sometimes too much– on gifts for family and friends. It's a time when people tend to blow their budget – if they had one in the first place, and a time where credit debts mount. But this year isn't normal. Many families are dealing with unemployment and lost wages due to a pandemic, according to a Pew Research Survey that showed one in four families had trouble paying bills. Savings accounts are dwindling. So what does that mean for the month ahead?
"The holidays can put a lot of pressure on people even during the best of times, making it harder to stay on track for long-term financial goals," says Molly Barackman-Eder, senior manager of financial capability at NeighborWorks America. "Talking to a financial coach is a great way to reflect on what is most important to you in the moment and in the long run so you can have a special holiday experience without derailing your financial future." NeighborWorks America's Housing and Financial Capability Survey, taken just months into the pandemic and released in July, showed a significant share of the American public is underequipped to handle financial challenges and that half of households with incomes under $30,000 have no emergency savings. More than one in five individuals are not confident they will be on track to meet future savings goals.
Layden Hale works as a financial coach at Homeport, a NeighborWorks organization in Ohio. He says the coronavirus has changed the way consumers are spending this holiday season. There are more online purchases, he says, "and 60% of us are already dealing with financial stress."Hale, who hosts a monthly financial podcast called Ask Layden, says this year has resulted in a tale of two cities. Families who kept jobs and reduced spending on eating out, travel, and other experiences due to risks associated with the spread of the coronavirus may find they have more money than usual. Families "who experienced layoffs, furloughs and business closings may be facing evictions, foreclosures and won't be spending the same as they did last year," he says.
For a time, Hale says, stimulus money from the federal government helped. "But those savings are all exhausted now. People are living on credit cards."
Laura Ospina Jaramillo, a financial capability manager at NeighborWorks America, says having clear goals helps us stay on track and follow our budgets, especially at times of uncertainty and constant invitations to spend.
"With the holiday season upon us, your everyday choices will affect your future outcomes, so think of your priorities and make informed decisions,” Jaramillo says. “Going overboard now on gifts or other holiday items could keep you from achieving your financial goals for years to come.”
This is not the time to overspend, agrees Hale. For his clients who have had their income impacted, reduced, and in some cases, wiped out by coronavirus, he guides them through creating crisis budgets and encourages them to contact creditors and ask for help if the cutbacks aren't enough to cover essentials. "Some cuts will only be temporary until your income comes back," he says. Hale offers four tips to help families keep the holidays bright:
"With the holiday season upon us, your everyday choices will affect your future outcomes, so think of your priorities and make informed decisions,” Jaramillo says. “Going overboard now on gifts or other holiday items could keep you from achieving your financial goals for years to come.”
This is not the time to overspend, agrees Hale. For his clients who have had their income impacted, reduced, and in some cases, wiped out by coronavirus, he guides them through creating crisis budgets and encourages them to contact creditors and ask for help if the cutbacks aren't enough to cover essentials. "Some cuts will only be temporary until your income comes back," he says. Hale offers four tips to help families keep the holidays bright:
- `Set expectations up front, he says. "Talk to your family and friends about setting spending limits, or consider drawing names, doing a secret Santa or a white elephant gift exchange."
- Create a holiday budget based on what you can afford after bills are paid. "Set spending limits and stick to them," he says.
- If the pandemic affected your income, this is the year to get creative, Hale says. "Consider making your gifts. Homemade gifts are more meaningful and a great way to save money. Choosing the right picture as a gift is memorable and sometimes invaluable."
- Consider giving the gift of time. "Give a gift of yourself and your skills with a coupon," he suggests. Offering to watch a sibling, cleaning out a garage, putting up or taking down Christmas lights are all things that could make someone's life easier, he says.
Budgeting during the holidays will help residents start the new year start on more solid ground. Financial coaches and experts at many NeighborWorks organizations offer guidance year round. NeighborWorks network directory helps locate NeighborWorks organizations in every state.
