‘Tis the season to toss all reason and spend as much as the credit limit will allow! This is admittedly a recipe for disaster. And yet, every year millions of people do just that. With incentives like differed payments and interest until 2015, even the most financially conscious among us tend to forget that the new year is only about 3 weeks away. And unless there’s a lottery win in one’s future, the whole idea of living for the ‘now’ only sets you up for a lot of pain later.
How much money you spend this season should be decided long before you find yourself in the midst of the madness. Financial planners recommend spending no more than 1.5% of your annual income on holiday spending. That includes big ticket items like travel and larger scale gifts, and smaller things like ornaments and even edible treats to share with co-workers and friends.
Base your budget on what you have now, not what you might have later. Once you set a realistic budget, keep it handy as you move through this season. Check off things that are paid for, and adjust for incidentals. Keep the budget active; it’s possible that you’ll find something cheaper (or more expensive) than you anticipated, so keep adjusting, and give yourself a realistic amount of wiggle room plus or minus.
2. Plan ahead.
That means getting started long before the holiday season gets here. Buy gifts throughout the year, instead of on big sale days. Some of the biggest shopping days are set up to move a greater amount of product in a shorter amount of time, and that means retailers are out for every dollar… sometimes by any means necessary. Rather than wait all year for the big rush (which may turn into the big letdown), keep a running tally of gifts you collect throughout the year. It’ll cut down on your stress both emotionally and financially.
3. Trim your list.
Know who you’re buying for and why. If it’s not necessary, cut it out. We’re pretty sure Aunt Edna won’t shed a tear if you skip giving her that hideous Christmas Sweater you found at the last second in the discount bin at the local department store.
4. Enjoy the season. In the end, the holidays are all about enjoying friends and family.
Remember that it’s much better to keep spending down and stick to your budget. Starting the new year off on the right financial foot is arguably the best gift of all.