Taking stock this Christmas

BY: Bernard Otabil

Exactly five weeks from today will be Christmas Day. This also means that in the next two to three weeks, early Christmas shoppers will be on the high streets looking for bargains. 

 Of course, bargain-hunting, in this digital age, will not be limited to only in-store shopping since there is every chance that online outlets will equally be available for shoppers too.

But, in broad terms, will it be business as usual, or in other words, should it be business as usual for consumers? Well, it seems that opinion is divided on how shoppers are going to respond to the big Christmas sales this year. Hopefully.

In an Institute for Fiscal Studies (IFS) study, funded by the Nuffield Foundation, a UK based independent Foundation with a mission to advance educational opportunity and social well-being, it is unlikely that consumers will be on the much anticipated shopping spree this festive season in the UK.

IFS, which is also UK-based, is of the opinion that despite consumers having around £150bn of savings on deposit to spend, the spending is not likely to happen until there is a clear path on the economic outlook.

In fact, according to latest figures released by the Bank of England, deposit savings and credit card balances increased in September, indicating that the propensity to save was high among some households, as more and more were saving unspent wages, while more vulnerable households needed to borrow to fund the purchase of essential items.

The cash build-up in deposits, and the availability of liquidity through cash advances that can be secured through other credit lines, had brought hope of possible strong sales by retailers. This is where the IFS disagrees with the big picture; banking on the economic uncertainty to dampen sales somewhat.

In other words, there are still clouds of uncertainty, and until that is lifted, the “reserve build up” by households, mostly during the pandemic, will remain in household bank accounts.

Even though this report has no direct bearing on the Ghanaian situation, it does contain some leads that could also help improve household finances during this festive period. I wondered, as l read through the report, whether the global picture was going to be any different from what the IFS is saying.

There is no gain in saying that consumers tend to spend more during Christmas, and other notable festive seasons, because these are periods that people tend to exchange gifts and show appreciation to loved ones.

This reflects in national import bills, as well as household expenditure. On record, the last quarter of every year is the time that high street sales go up because of increased individual and household spending. And it also follows that because of the increased spending in December especially, there is always some financial anxiety in January; something is always needed to assuage the pain of the excess spending the previous month.

With the global economy in pandemic-recovery mode, governments are resetting their economies, as households are also trying hard to find the right financial balance. Of course, this makes it difficult for anyone to assume a business-as-usual approach during this festive period, as far as household spending is concerned.

Be that as it may, prudently managing your finances is a requisite in household planning. And that your spending must always mimic what the big picture depicts. For instance, if the mood among policymakers is “cautionary”, why would you ignore all the warning signs and go into overdrive with your spending?

Understandably, the commercialised approach to Christmas, highlighted through increased advertisement, and the generally accepted norm of exchanging gifts during the period all have an impact on the pocket too. But, significantly also, when the spending is not matched by a corresponding pot of funds, chances are, the individual or household budget suffers.

This can really become troubling if the right cushion is not available to help you absorb the financial shocks following an unplanned spending cycle. And the lessons learnt from the unexpected COVID-19 pandemic over the past two years should serve us well when it comes to our financial simulation process.

I believe that this is the right time for us to take stock of our journey so far, measure the risks and make a fair assessment of what we ought to do, and those we can hold on until the economic conditions are a lot more favourable.

The economists have already started talking about the economic outlook for next year, and that is the technical guidance you need, as an economic agent too, to shape your financial decisions for the rest of the year- and beyond.
The opinion expressed by the economist is not just “a mere expression of an opinion” but rather statements that must feed into your own personal planning.

We all have different attitudes to risk, which means that you should not just follow what someone else is doing when it comes to their financial decisions. Your attitude to risk should guide the decisions you make.

As far as the COVID-19 pandemic is concerned, we are still not out of the woods yet. And, as it has been identified by analysts and policymakers, a high degree of uncertainty about future macroeconomic developments prevails.

The COVID-19 pandemic will dominate global discussions for years to come, and certainly influence academic discourse on so many areas of life- controlling pandemic, building economic and financial resilience, developing fiscal and monetary prudence, building social safety nets and economic buffers, and so on.

Christmas is the festive cheer that also brings blues because increasing spending without a corresponding increase in income will always throw the budget out of gear. And when that happens and care is not taken, there could be “system failure”- literally!

System failure because your entire financial plan the following year will require recalibration to sync expenditure to income correctly due to the over spending in the month of December alone because of Christmas.

Every purchase is a choice, and the accompanying price we pay is always more than the in-store marked price. So, understand that Christmas, and for that matter festive periods should not provide you with the cover to go into over-drive with your spending.
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