Unless you're living under a rock, there's virtually no escaping the overwhelming marketing onslaught for the end-of-year holidays, which in some parts of the country starts even before Thanksgiving.
As the adage goes, there really is great joy in giving at this time of year and one should, said Justin Reckers, director of financial planning at Pacific Wealth Management. However, it's also very easy to get carried away, and even those with ample means can be swayed by the season, spending far more than they should and facing dire consequences when the joy wears off, particularly if they have left their shopping till the very last minute.
"Inevitably, I get clients coming in to see me in January – people who usually don't rack up credit card debt – saying they have put far more on their card than they should have and that they need to get a check cut from their investment portfolio to pay for this," Reckers said. "They overspend on the holidays, and that means I have to pull the trigger on an asset I'm holding for them, which of course then becomes detrimental for their future."
Although Christmas is almost upon us, financial advisors still have an opportunity to speak with their clients to get them to see the long-term effects that holiday overspending could have on their investment portfolio. Advisors need to appeal to the attributes of economic rationality and self-control that are in every human being, Reckers said, but get very quickly and easily overshadowed by the force and power of holiday marketing.
Marketing stokes certain human emotions, particularly as Christmas gets close, when the brain is prone to thinking, "I haven't shopped enough," Reckers said. This is when frenzy takes over and people are prone to spending in an irrational manner that can make their future financial situation dangerous.
"As advisors, we need to get people to veer toward self-control, to get people to realize that they are going to have these impulses that will take them over and cause them to do things they will regret in the future," he said.
Reckers works early on to get his clients to shop in an economically rational manner, to counter the economic irrationality marketing engenders and to bring their innate behavioral trait of self-control to the fore.
He tries to get his clients to think hard about who they feel they need to give gifts to and then to set up budgets.
