Whether it's planning for Christmas, Hanukkah, a big New Year's Eve Bash, a family trip to grandparents, or a pricey winter vacation, the time is now to get your finances in order to avoid debt and regrets that can lead to the holiday blues. The season of gift-giving and fellowship too often creates the spirit of giving far beyond what you can realistically afford. However, if you start now you can be holiday guilt- and debt-free with the new year. Here are seven ways to stay on track.
1. Review Last Year's Expenses
The best starting point to determine what you can afford this holiday season is to review what you spent last year. Be honest and thorough, and remember to include items such as holiday cards, postage, gifts, food, travel, and even special occasion clothing. Purchases such as teacher gifts, children's parties, portrait sittings with Santa, entertainment for kids while school is out, babysitting and extra child care expenses, and decorations should be included as well.
2. Determine Whether Last Year Was On Target or Caused A Bad Case of Debt
Once you've calculated your holiday expenditures from the past year, the next step is to determine whether it was excessive or appropriate. If it was right on the mark, you most likely have your budget target going forward for this year as well. And, if it caused debt heartburn? Scale back the number to what will work without creating financial hardship and the stress that comes with it. Factor in any job changes or new purchases that impact available cash. The result should be your budget.
3. Create Expectations and Family Buy-In to Budget
OK. You've got your magic budget number. But, unless everyone is willing to stick to it, then the target is for naught. The key is to communicate with family members and begin planning now to avoid last-minute weaknesses and over-buying. Minimal lifestyle changes such as skipping dessert in a restaurant, packing a lunch, or renting less movies can help to save money that can be earmarked for the holidays. Kids can contribute to a coin jar and learn about the value of saving as well.
4. Make a List; Definitely Check it Twice
Record everyone on your gift-giving list and be sure to check it twice. Set recommended amounts and then keep track of spending along the way. Recognize that over-spending in one area means that you MUST reduce costs in another...a notion that is easier said than done when you're in the throes of the holiday spirit. Check your list for necessities and consider changing the amount of a gift if your budget is looking tight. Remember, it really is the thought that counts!
5. Say No to Last-Minute Temptations
Stores know the temptation of exquisite decor displays and fab clothing that lead to impulse purchases, and with it, a case of buyer's guilt later. Be strong and don't give in. A pass on that $100 lush velvet skirt today may ultimately lead to a much happier and financially-fit spring season next year. A general guide: if it's not on your "approved" list, then the answer is no. Exceptions can occur, of course, on last minute party invites or occasions but keep close watch on overall costs.
6. Decide How To Pay and Stick With It
Financial advisors often recommend an "all-cash" philosophy to avoid overspending your budget, but sometimes a credit card makes more sense (easier returns, some merchandise protection, having a paper trail). For those purchases, select a single credit card for careful tracking and research which rate or limit works best with your need. Many cards offer easy online review of transactions so you can keep on top of expenses.
7. Remember That Budgeting is Liberating and Not a Downer
Don't let budgets and financial planning put your emotions into the doldrums; rather, use the experience as a financial liberation. Having a budget can actually free you up from some of the stress that comes with the holidays by giving you permission to pass on things you really didn't need and would most likely not really want after the holiday season anyway. Avoiding excessive debt and overspending is the best holiday gift to yourself long after the ho-ho-hos and celebrations end.
