This post is probably too late for anyone who’s already headed out the door into the crazy world of Black Friday shopping. If so, perhaps you can consider how to better prepare for next year’s Christmas shopping now.
I was somewhat shocked when I opened up the Wall Street Journal last Wednesday and read about how American debt was on the rise again. Much of this is due to the feeling among most Americans that the recession is over. Job prospects seem better and the housing market is in full recovery, so consumer spending and borrowing has been on the rise since the last quarter of 2007.
There was a bit of good news in the article because credit card debt has fallen $159.08 billion since 2007, but it’s on the rise again. If credit card debt follows the trend that mortgages, auto loans, and students loans have over the last 1 to 2 years, then you can expect Americans to to add several trillions in debt in the years to come. As a culture, we’re well on our way to surpassing the 2008 peak of $12.36 billion in total household debt.
Black Friday is a Two-Way Street
It’s no secret that many retailers depend on the Christmas shopping season for a large portion of their yearly profits. If you think about it, this obviously means that the vast majority of America’s household consumer debt is accumulated during this same season. Even though Black Friday spending was down last year, the average Black Friday shopper still spent $407.
How much of that spending do you think was planned? I don’t mean planned as in, “Hey, this look like a great gift as a great price. We should buy it!” By planned I mean the money for Black Friday purchases was in the budget and set aside in cash.
The truth is, most American’s can’t afford Black Friday.
The word affordable in today’s culture is usually measured by whether we can make the monthly payments. We walk into a store, find a product we want to buy, try to get the best financing possible, and then see if we have enough wiggle room in the “budget” to cover the added drag on our income. Then, the next time we find a product we want, we simply repeat the process all over again.
Now consider that on Black Friday, not even this much forethought takes place. Such frenzied shopping only allows for a mad dash to the back of the store while delivering a well-placed elbow or two to grab the day’s prize. Then it’s an upstream swim to get to the cash registers and swipe whichever credit card hopefully has enough to cover the purchase. There’s no thought about the cost until the credit card bill comes in just after Christmas, completely ruining our festive mood.
I’ll admit that I once lived this way. Though I’ve never been out shopping on Black Friday, I can’t recall how many times I purchased something without any real thought. The only question that ever entered my head was the one I asked my wife: “Do we have enough money left at the end of the month to cover paying for this thing I want?”
There’s a better way to spend money.
Let’s redefine affordable to mean what it meant to our grandparents and great-grandparents. Do you realize that the contemporary concept of consumer credit wasn’t introduced to the world until 1950 when Diner’s Club came on the scene? How did people possibly get by?
If you want to keep yourself out of the red on Black Friday, and any other day for that matter, you need to redefine the answer to “Can I afford this?” for yourself. Here are a few questions you should ask yourself:
Determining if You Can Afford to Make a Purchase
- Do you have the cash for the purchase? The first step of redefining affordability is pretty simple. If you don’t have cash on hand to cover the purchase, you can’t afford it. If you have to borrow a single dime or put a single penny on a credit card, you can’t afford to make the purchase. You’re choosing to not live within your means. You’re choosing instant gratification over wisdom.
- Have you planned ahead for the purchase? Is it part of your budget? Let’s say you want to buy a new TV. This isn’t to say you need to have a specific line item in your budget labeled “TV,” but at the very least you should have a line item labeled “Christmas purchases” or “gifts” AND it should have enough cash available to fully fund your TV purchase. If you haven’t budgeted for your purchase, you can’t afford it.
- Have you searched for the best deal? This time of year, there are dozens of deals available, but before handing over your hard-earned cash, make sure you’ve diligently searched for the best deal. Nowadays, you can often find deals as good or better online compared to the stores. In fact, if you search deep enough, you’ll probably find a better deal. This is true especially when you consider that many of the “doorbuster” deals on Black Friday are for relatively low-quality products, or for a very limited supply. It may be worth spending a bit more to get a better quality product. And if you find a better quality product that you don’t have enough cash for, just be patient and save up a little while longer.
- Will you have to “steal” money from somewhere else in your budget to make this purchase? Part of making sure that you really have the cash to afford your purchase is that you’ve specifically set the money aside. Don’t even consider using money that you’ve put aside for another purpose.
- Are you planning to take money from your emergency fund or long-term savings? Buying Christmas presents is NOT an emergency. Christmas comes around in twelve month intervals, so it’s not a surprise. You’ve had an entire year to plan and set money aside for your purchases. Please don’t be foolish and steal from your future either. Leave your hard-earned savings alone.
In the end, make sure that you don’t come to regret your purchases by sinking yourself further into debt, making an impulse purchase, or not searching for the best deal possible.
When you come to the realization that debt is like a great weight dragging you down and keeping you from reaching your financial goals, you’ll do all that you can to keep from adding to that debt. You’ll learn that delaying gratification and keeping yourself from making foolish purchases is far more satisfying in the end that the temporary pleasure your purchase might bring.
Here’s a handy flowchart to help you make a better decision.
Adapted image by Christian Ferrari
Also published on Medium.
I’m Jeff M. Miller, and I help ordinary people who are stuck in a rut change their behaviors so they can be extraordinary. I’m an entrepreneur who retired from my full-time job in my early 40s to work from home. I’m a financial counselor, life coach, graphic designer, and passionate believer in helping others improve their lives a little more each day.
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