Expressing holiday spirit by spending too much money can be a big problem for some, even the wealthy. So it would be wise for advisors to help their clients’ rein in spending by understanding the psychology behind it.
Sure, money means excitement over the prospect of spending a bundle on a big-ticket item for a loved one or happiness when receiving a generous gift.
But money also means love, acceptance, self-esteem and an attempt to express love or buy it outright with the purchase of gifts–whether or not they’re affordable, says Money Harmony psychotherapist Olivia Mellan, who also contributes regularly to Investment Advisor magazine.
“Money is a taboo subject,” says Mellan in a recent phone interview with AdvisorOne about holiday spending. “When people are tired or under stress, and the holidays are definitely a time of stress, they will almost always revert to primitive survival mode, which is irrational.”
“Affluenza,” as Mellan (left) calls it, is an American disease of addictive overspending that takes a lot of courage to avoid. At holiday time, she says, steering clear of affluenza to embrace a healthy psyche instead might actually be more valuable than a gift. Advisors, financial writers and even the Consumer Federation of America back up Mellan’s call for more mindful spending to celebrate the spirit of the season.
Planning ahead is key to a mindful December, notes Kelly L. Trageser, a NAPFA-registered certified financial planner with Sea Clear Financial Planning of Sea Girt, N.J., who includes cash flow advice and debt management among the services she offers clients.
“Although this is the season of giving, it is important to give within your means,” Trageser wrote to AdvisorOne in an email. “The best chance of doing that is to review your budget and decide how much you are comfortable spending this holiday season. Then, create a list of the people that will receive a gift.”
By dividing that list into thirds, shoppers can reduce expenses, according to Trageser. The first group gets a store-bought gift, the second group gets a gift card, and the third group gets a homemade gift such as a tin of cookies. “This is a great way to keep a handle on spending this holiday season and still have a great time,” she says.
Numbers Tell Holiday Spending Story
Research by investor site MillionaireCorner.com shows that 6% of 1,224 people studied, who have at least $50,000 in net worth, plan to make a major purchase this holiday season. While the 6% is consistent for men and women, it varies more by age, with 14% of those 40 and younger planning a big purchase versus just 4% of those 60 and older.