How To Actually Afford The Holidays This Year With Financial Advice From LearnVest's Alexa von Tobel
The holiday season is here and that can only mean one thing — the hunt for the perfect gifts for your friends and family has begun. But before you start swiping your credit cards, it’s crucial to make a plan to keep your spending in line. Heading into the holidays without taking your finances into consideration could leave you crawling out of debt for months. Feeling stressed much? We get it, and we’ve you covered.
Bustle asked Alexa von Tobel, New York Times-bestselling author of Financially Fearless, to take over the Bustle App and offer her best holiday gift-giving tips. The author is also the Founder & CEO of LearnVest, a program that makes financial planning affordable and accessible. And, much like the rest of us, she’s learned a lot from her own financial mishaps. So, she gets it — financial planning is hard sometimes.
To get us ready for the holiday season, von Tobel talked the basics of financial planning and how to tackle holiday spending like a pro with Bustle! Here’s what you need to know going into your holiday shopping and gift-giving:
The #1 Mistake 20-Somethings Are Making With Their Finances
“Most 20-somethings— male and female—don’t realize that retirement is something they need to think about and plan for today. But, that’s a big mistake,” von Tobel said, “Thanks to the power of compounding interest, money you start putting away at 25 has far more opportunity to grow than money you put away even 10 years later. Even if you can’t afford to contribute a ton right now, every single dollar counts so it’s important to get started.”
How To Start An Emergency Fund (Even If You Think Money Is Tight)
“I think the biggest thing that has empowered me and changed my life is not being afraid of my money — knowing that I can feel in control, even just from learning the basics,” von Tobel said, “And feeling in control is not about how much money you make or don’t make. It’s about having a plan in place that helps you feel confident you’re making progress toward your goals, one day at a time.”
“And, as I said before, every single dollar counts,” von Tobel continued, “Even if money is tight, it’s important to start small and build up your savings muscles so that you can continue these good money habits in the future.”
*This* Is How Much Of Your Paycheck You Should Save Every Month
“As a general rule of thumb, consider putting about 20% of your budget toward future financial goals,” von Tobel said, “This can include a ton of different savings goals, like your emergency fund, retirement savings, any big goals you’re saving for, like a home.”
How To Do Holiday Gift Giving On A Budget
“First, and most importantly, approach the holiday season with a plan,” von Tobel said, “I highly encourage my friends and family to shop year-round to score the best prices.”
“Also, regardless of when you start shopping, it’s important to have the money set aside to cover your holiday expenses before you start shopping. So one thing I often recommend is setting up a holiday savings account specifically to cover these expenses,” von Tobel said, but also stresses that it’s important to be open about your finances during this time of year, “Whatever you decide to do, it’s important to have the conversation and be open with loved ones instead of stressing and struggling to cover the costs of your holiday gift list.”
Black Friday & Cyber Monday: Are They Worth It?
“Regardless of when you choose to take advantage of deals, again, always have a game plan,” von Tobel stressed, “Just because something is 40% off, doesn’t mean it’s something you need to own — unless, of course, this was something you’ve been planning on buying all along.”
It’s OK To Treat Yourself Sometimes
“Everyone always thinks of a budget as something that tells them ‘no,’ and that it is all about abstaining,” von Tobel said, “But a really balanced budget accounts for splurges and things that bring you joy — it’s not about feeling deprived — otherwise you’d never stick to it!”
When it comes to money you get as a gift or a bonus, one rule of thumb you could follow is the 90/10 rule: Put 90% of any extra cash toward your financial goals (like your retirement or paying down credit card debt) and spend the leftover 10% on something nice for yourself, whatever that might be.
Sometimes You Have To Learn The Hard Way
“Not having a financial plan is a plan—just a really bad one! Given what I see as a general lack of personal-finance education, it can be all too easy to try to wing it with your money and not understand some of the basic things you need to have as part of a financial plan,” von Tobel said.
“As a small scale example, I once turned down getting a $6 per month dental plan because I’d never had a cavity and my teeth were in great shape. You know how this story ends…as soon as I turned down the insurance, I got a cavity,” von Tobel continued, “It was really expensive to fix, and being insured would have saved me a lot of money. That’s what made me realize people don’t understand some of the basic things you need to account for in a financial plan and are often afraid to ask.”
Check out the "Trending" stream in the Bustle App to see Alexa von Tobel's takeover in its entirety and get up-to-the-minute updates on absolutely everything you care about.
Images: Courtesy of LearnVest/Claire Esparros, Homepolish; Giphy