As the holiday season approaches each year, many people are ill-prepared for the expenses and debt that can accompany the season’s festive celebrations. Thanksgiving, Hanukkah, and Christmas only come once a year and you don’t want to spend the next year paying off your bills. Before you head to the shopping malls or online stores to buy gifts or plan travel, take a moment to make a budget for the holidays. Your holiday spirit, wallet, and checkbook all will thank you.
It may not sound fun or exciting, but it is the No. 1, sure-fire way to manage your money and avoid holiday credit card debt. Calculate how much you can and want to spend for holiday festivities, and write it down. It need not be complicated – pencil and pen, or a spreadsheet, will work fine. Compare your total to a list of everything you anticipate spending on this holiday season. Depending on your individual situation, you may need to include:
- Everyone you'll give a gift to and how much you plan to spend
- Cards and postage (which could be zero if you send cards online or by e-mail)
- Entertaining, including food, drink, special garments, child care, etc
- Year-end tips for newspaper carriers, babysitters, housecleaners, doormen, hairdressers and other service providers. (See “Don’t No. 4,” too.)
- Gifts for teachers, doctors, neighbors or others close to you
- Travel costs
If you find that must-have gift for $5 instead of $35, do not “just buy a few more things” to spend the extra $30. Remember, it's the thought that counts -- and your recipient will appreciate the value of that perfect gift. Use the money you saved for a truly meaningful gift for yourself -- like paying extra on your credit card or adding to your retirement fund.
Smart shoppers make a list and purchase for others when they see the item on sale during the year. Save some of your holiday budget this year to buy next year’s items at after-Christmas sales, and save those gifts for next year.
Instead of handing over a mountain of presents, give thoughtful experiences or build future value – and match your outlays directly to your budget. Buy theater tickets or movie passes, make a donation to a charity in the recipient's name, or give a child the gift of sports or music lessons, or a contribution to a 529 account. Gifts of time can stretch budgets further, and mean the world to recipients. Offer to shovel snow for an elderly neighbor, offer babysitting services, or get a group together to surprise neighbors with an old-fashioned caroling party.
As soon as you purchase an item from your list, enter it into the “purchased” column of your budget. This will help you stay on track day by day. Also do a weekly check.
Think before acting and reacting. Take a step back, take a deep breath (literally), and remember that nothing is more important than protecting your well-being – physical, mental, emotional, financial. Finances contribute significantly to holiday stress, so if you protect your budget, you'll make it through the holidays with less stress and a clearer conscience – which will bring plenty of joy, now and into 2013.
Give what you can afford and do not go into debt. Do not give what your sister thinks she deserves, a gift equal to what your cousin gave you last year, enough presents to make a certain-sized pile under the tree, or whatever other measure might be luring you toward overspending. Those who truly love and care for you would not want you to suffer financially in order to give them a bigger gift. Make it a practice to give reasonably, with a generous smile and sincere heart.
Once your holiday list is complete, start shopping! Keep a copy of your list in your purse or wallet; when you see the right gift at the right price, check it off and stop shopping for that person. At home, designate a closet, empty chest of drawers or laundry basket as a holiday gift repository. Tape your list to the top, and check off recipients whose gifts are in the bag. Waiting til the last minute almost assures spending without a check on the budget.
Many people do well with holiday budgets when it comes to buying presents at the store. They then blow the budgets because they didn’t think about all the tips to give service people at the holidays. Make sure to include tip recipients in the budget, but remember that the most important element is to let those who take care of you know that you appreciate their work, all year round. Remember too that some people -- such as teachers, mail carriers, delivery personnel, doctors and coaches -- are prohibited from receiving cash gifts. A small, thoughtful gift can show your appreciation (and keep to the budget). A batch of holiday cookies, a gift bag of personal care items, or a "movie night" gift package with popcorn and a video rental gift card can be great ideas, as can a small gift certificate to a local restaurant where the recipient can take a lunch break. Or team up with other parents or neighbors to purchase an appropriate group gift.
At least minimize use. Instead, use cash or a debit card to help keep to your budget. Studies have found that people spend around 15 percent more on purchases paid with a credit card. To make the cash go even further, try using large bills. People tend to hold on to large bills longer than small bills, so try setting out with a $50 bill instead of a wad of ones, fives, and tens. To really keep to your budget, before going shopping, put the budgeted amount of cash for each intended recipient into your wallet, take your list, and then head to the store.
With just a little effort and planning, you can create and use a simple holiday budget. When you work from a budget, your holidays can be far more carefree. Ultimately, you will be able to focus on joy and fun at the holidays, rather than worrying about the bills that come tumbling in afterward when you overspend.
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