Right Now Is a Bad Time to Spend Money

With prices and interest rates high, this is a moment to focus on saving

The National Retail Federation forecasts holiday spending will grow to as much as $966.6 billion this year. Photo: frederic j. brown/Agence France-Presse/Getty Images

Prices remain high for much of what we buy, even as inflation has slowed. Stingily saving money, meanwhile, is a more profitable activity than it has been in recent memory. 

Since the Federal Reserve raised interest rates to a two-decade high, any dollar spent today is a lost opportunity to earn as much as 5% or more in savings accounts, certificates of deposit and bonds. High rates also make it significantly more expensive for people to spend money they don’t have, with the annual interest rate on some credit cards pushing 30%.

The temptation to spend more around the holidays is inevitable, but there are ways to fight it, financial advisers and behavioral economists say. Chief among them is to make your financial resolutions now and not, when most people do it, long after the damage is done.

A new season or date on the calendar can give new financial habits a boost, but there is nothing magical about Jan. 1, said Katy Milkman, a professor at the University of Pennsylvania’s Wharton School, who has studied how people can use the idea of a fresh start to change their ways.  

“If someone is deciding between waiting for New Year’s or starting immediately to improve their financial situations they’re better off starting immediately,” Milkman said.

Despite the incentives to spend less this year, Americans are expected to keep going. The National Retail Federation forecasts holiday spending will grow between 3% to 4% from last year to as much as $966.6 billion. 

Here are some ways to minimize your own contribution to that sum. 

WSJ’s Dion Rabouin unpacks the latest GDP report and explains what it says about the state of the economy. Photo: Li Jianguo/Zuma Press

Give yourself an audit 

Before Black Friday, look closely at your holiday spending over the past three years to get a real baseline for the season’s costs. 

Matt Fizell, owner of Harmony Wealth, a financial advising firm in Wisconsin, recommends printing out bank and credit-card statements and writing out each expense by hand. Make note of recurring costs or fees that might have increased over the years to see what can be eliminated this year. 

Also acknowledge the big purchases made around this time that were enjoyable.

“Maybe you spent $2,000 to go to London and that was a really good expense,” Fizell said. “What can you do to make more of that happen?”  

Group your holiday spending together

People tend to underestimate how much they will spend, said Abigail Sussman, a professor at the University of Chicago’s Booth School, who studies financial decisions. 


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We create mental budgets based on our typical expenses and often fail to account for the inevitable unexpected spending that comes up, her recent research with other co-authors found. This is especially dangerous during the holidays when there is an even greater opportunity to spend on the things we don’t normally buy. 

Sussman suggests planning for the full range of holiday spending at once rather than each category in isolation. Combine your expenses for gifts, meals, parties and travel, and look at that number.

It also helps to shop for all Christmas presents at once or in several larger purchases. Doing them separately makes it easier to overspend.

Be honest with your family—and yourself

Be candid with friends and family about your feelings about holiday spending this year, despite how uncomfortable it might feel at first, financial advisers say. Consider setting a limit on the cost of gifts or agree to forgo material presents altogether.  

“It’s a really cool thing to just have those open conversations with family,” said Lauren Mathews Fairey, a certified financial educator at WealthWave, a financial-services company. “They’re probably thinking it too and you just don’t know it.” 

When she finished maternity leave last year, Delaney Ripple, 29, left her job in healthcare so that she could spend more time with her daughter and build her own business in the financial industry. Since then, Ripple and her husband have talked about ways to cut back on spending during the holidays. 

In lieu of physical gifts, Ripple and her husband are thinking of offering coupons for free technology help to their older family members. 

“We’re just trying to focus our time and our energy and what we’re giving to others on things that are invaluable,” Ripple said. 

Write to Oyin Adedoyin at oyin.adedoyin@wsj.com

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