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The Not-so-merry Impact of the Holidays on Financial Goals

December 14, 2016 | Kendra Galante

There really is nothing better than celebrating the holidays with friends and family. However, with the holiday season can also come a few less warm and fuzzy things…like snow…and blistering cold…and spending.

With so much to look forward to, and so much to keep in check, how are Americans balancing it all?

TD Ameritrade recently surveyed more than 1,000 American investors about their plans for holiday spending, from Black Friday and Cyber Monday, to holiday meals and New Year’s Eve parties. A few things in the survey stood out:

  • 37 percent of respondents don’t track their holiday spending at all. They just spend what they want.
  • 27 percent planned to spend up to $250 on Black Friday.
  • And Cyber Monday? 33 percent planned to spend up to $250.
  • About half of respondents planned to spend between $250 and $1,000 on holiday gifts in total.

And this is what people planned to do. Reality, on the other hand, can be different. A National Retail Federation survey found that during the 2015 holiday season, 40 percent of consumers spent at least $50 more than they originally budgeted. Twelve percent of consumers blew their budgets by more than $200.

Consider that $200 in the context of long-term financial goals like saving for retirement, making an extra investment or paying down debt.

For example, if someone has an initial deposit of zero, and chooses to deposit $200 a month at an annual rate of 5 percent, that investment would come to roughly $31,000 over ten or more years and $82,000 over 20 or more years.

While an extra $200 may seem worth it in the spirit of the season, it’s important to consider what these extra expenditures throughout the year can mean for finances. Not only is it important to have a holiday budget built before the season blows in, but these numbers also underscore the importance for overall financial goals and trying to stay on track throughout the year.

The more people set goals (and write them down), the more likely they are to feel they are going to achieve them. A 2016 TD Ameritrade survey found that individuals with a financial plan are more likely to feel they are financially prepared to meet their goals. And by writing down financial goals, which can be as simple as “I will stick to my holiday spending budget,” individuals are more likely to achieve their goals, according to research.

That’s why it’s imperative to take financial care during the holidays, when it can be easy to derail financial goals at the sight of an amazing deal or the absolutely perfect gift for that hard-to-shop-for friend.

Image via Dreamstime.com