The holidays are here and if you’re not careful, your hard-earned cash can disappear faster than raspberry truffles at Santa’s workshop. Make sure that your well-intentioned gifting doesn't have you slip-sliding into deeper debt than you can manage.
By nature, this time of year can be emotionally charged as well as a drain on finances. Without a plan in place, big financial trouble could loom by the time January 2019 rolls around. So how do you give to those you love during the holidays and not neglect the impact holiday spending can have on your ability to manage your debt?
To avoid a financial starvation diet in the new year after over-indulging during the holidays, try utilizing these five techniques to plan for a holiday season that is full of cheer and not stress.
Create a Holiday Budget
Creating a budget specifically for the purpose of holiday spending might have more of a “Ba-humbug” ring to it than “Fa-la-la-la-la, la-la-la-la” but if you value your money, it could be well worth your effort. Creating a specific holiday budget is the most effective way to emerge from the holiday season on secure financial footing and not feeling like it’s your first visit to the ice skating rink.
As a general rule of thumb, it’s perfectly acceptable to allocate no more than one and a half percent of your annual gross income for holiday spending. If that feels too high, then work around this budget this year and create one that feels comfortable to you. Make a mental note to implement more cost-saving measures in the coming year so that you can achieve this budget level in the next holiday season. Remember that you are setting a budget that you will spend over and above the regular expenditures for the two-month period leading through the holidays.
Once you’ve set a realistic goal for your holiday budget, the next step is to identify who’s been naughty and who’s been nice: family, friends, co-workers, neighbors, your children’s teachers, the mailman, the company driver, etc. Make your list and check it twice!
Next, set the budget per recipient. Review your list to adjust the amounts as you see fit, but keep in mind that the total amount should not exceed the budget you have set for total holiday spending. PRO TIP: Give thoughtfully; not to impress. Don’t forget to allocate for your children’s expenses for their own gifts as well. This should be done within the confines of your total budget and needless to say, should also be a limited amount.
Then there are the hidden expenses. Holiday lights will probably increase your electricity bill, postage for greeting cards and delivery charges for gifts to distant friends and relatives will add up too. If you’re planning to host a party there should be a separate budget for it. If you’re attending one or a number of parties, you should allocate for gifts to hosts.
Once you’ve completed your naughty-or-nice list, you’re ready for the next step...
Window Shop Prior to Purchasing
These days, it pays to shop around before actually buying your gifts. Expand your search to online resources to determine if it could save you some money. Truth be told, you could realistically save both time AND money by going this route. Coupons are another effective way to save on costs. If you’re good with your hands or have some unique, creative talent, consider DIY gifts. These are sure-fire ways to save on your holiday expenses.
Stick to Your Budget
All of that well-laid holiday financial planning would essentially amount to sugarplums dancing in your head if you let yourself to stray from your budget and allow impulse spending to creep into your purchases. Stick to your budget. Always shop with your list. Buy only what you’re shopping for.
If you can, resist buying gifts for yourself. Research by the National Retail Federation found that fifty-seven percent of Americans spend almost $127 each holiday season on gifts for themselves. That money could be used to complete your gift list. You can always reward yourself after the holidays when your budget situation eases up.
Pay in Cash
Numerous studies have shown that when we swipe our plastic, our brains literally shut down, leaving the purchase process in limbo. This is one reason credit card debt gets out of control. Avoid this situation by paying in cash. If you’re shopping online, use your debit card, so you’re aware of the fact that the funds are coming directly out of your account. By doing this - especially exchanging literal cash for the gits that you’re buying - keeps your mind on the process and on the amount of money you are parting with.
Keep Track of Your Balances
Don’t wait for the new year to check whether or not you stayed on track with your holiday budget. You put time and effort into it, so resist the inclination to ignore it. Running a balance through the holidays not only ensures that you’re spending as you’ve planned but also guarantees that you’re putting yourself in an advantageous financial position for the upcoming year by avoiding falling into further debt.
The holidays can be a stressful time, but you can alleviate the financial pressure by organizing your gift giving with a well-thought-out budget. In doing so, you’ll avoid overspending, dreadful January credit card bills, and ensure that this holiday season is merry and bright!