Tuesday, 6 December 2011
Guest Blog - Yuletide Financial Advice
In keeping with the yuletide spirit, let's take a look at the investing vocabulary that goes along with this credit card-shattering time of year.
Santa Claus Rally
He's bearded, he's jolly, he’s fat … and he's permanently associated with Coca-Cola - yep, that's Santa Claus. Santa's origins are a matter of speculation but according to popular belief he is based on the historical figure Saint Nicholas, who supposedly gave presents to the poor.
The modern-day Santa spends his time spreading cheer and promoting world peace by delivering gifts all over the globe. In the investing world, Santa brings investors a "gift" in the form of a jump in the price of stocks, known as the Santa Claus rally. This rally usually occurs between Christmas and New Year's Day.
There are many theories as to why this happens. Some people believe it is a result of year-end tax considerations, while others say it's because all the market pessimists are away on holidays or because people are buying stock in anticipation of the January effect. Those of us who believe in the magic of Christmas think the rally may be due to seasonal cheer infecting the usually dour inhabitants of Wall Street - a true Christmas miracle
Your choices: With the promise of a new year and a set of fresh resolutions just around the corner, we often let loose for the holidays - sipping an extra drink at the office holiday party or packing on a few more pounds under a winter wardrobe. But don't let holiday cheer make you lose control of your spending, too. Avoid these ten missteps to stretch your budget through the holiday season:
1. Being blinded by bargains. Desperate retailers ushered in the holiday season early this year with premature Black Friday-esque sales, pushing you straight from your Halloween costume into your Santa suit. Don't let the abundance of bargains trick you into buying something simply because it's on sale.
2. Forgetting to budget for the extras. Remember to factor in the costs of greeting cards, postage, family photos, shipping, decor, entertaining, travel and even higher utility bills for your festive outdoor light display.
3. Buying on credit. If you have to put the purchase on your credit card or sign up for the store's financing, you simply cannot afford it. Any good deal you thought you were getting will be eroded by the interest you'll accrue and the time you'll spend as a hostage of debt. About 13.5 million Americans are still paying off last year's holiday bills, according to Consumer Reports.
4. Not keeping the receipt. Don't you hate it when you find someone's perfect gift deeply discounted … after you already bought it at a higher price? If you hang on to your receipt, you can save yourself the regret and the extra cost.
5. Spending to impress. This is a biggie, especially for young adults who may feel compelled to prove their success and their new independence. Don't let your gift giving become a larger statement than the gift. Before tossing something in your cart, ask yourself whether the recipient would really use it and whether you can really afford it. And the same goes for entertaining. It's the company of friends that matters, not how much money you spend.
6. Over-giving. It's wonderful to get caught up in the spirit of giving but not if that means you'll break your budget or go insane trying to pull it off. You don't have to buy something for every single person you know (co-workers, neighbours, newspaper deliverer, that guy you make small talk with at the bus stop). Stick to the people who count most in your life.
7. Giving in to gift guilt. Don't let guilt drive you to break your budget or go into debt. You don't have to spend the same amount of money on every kid on your list, for example. Giving thoughtful, age-appropriate gifts is much better. You are also not obligated to give a gift that has the same monetary value as a gift someone gave you, or even to reciprocate unexpected gifts.
8. Failing to do your homework. That discount looks like a good deal, but do you know whether it's the best value for your money? (Remember, inexpensive sometimes just means cheap.) Hit the Web before making major purchases to compare prices, read customer reviews and make sure you're getting a quality item at a good price.
9. Procrastinating. In the frenzy of last-minute shopping, you'll have no time to give thoughtful presents and might compensate by spending more. To avoid that panic-induced splurge, get your gift list in order early (like, yesterday) and give yourself time to shop smart.
10. Fruitcake. And for heaven's sake, don't waste your money on a bad gift. You may as well toss your money on a blazing yule log. Here are some common gifting gaffes to avoid:
· Gadgets they'll never use - golf-ball-finder glasses, battery-powered potato peeler
· Desk clutter - "gone fishin'" plaques, Zen gardens, paper weights
· Overly personal - lingerie, nose-hair trimmers, weight-loss books
· Thoughtless - cookies for the diabetic, wine for the recovering alcoholic or, my favourite, giving someone the same gift two years in a row
· Tacky - holiday clothes, stuffed animals for anyone over age 10
· Cliché - snow globes, coffee mugs and, yes, fruitcakes
David is my friend and a licensed FA. He has a wealth of experience over many years in the industry. I have asked David to provide regular hints and tips as we all could do with some particularly during these trying times.