10 Ways To Avoid Post-Holiday Regrets by Managing Your Finances The holidays are filled with temptation to go overboard with spending. Hereís how to manage your holiday spending. BY ERIC TYSON
Having a budget and a shopping list during the holidays will help keep your debt in check.
“ Donít go shopping for someoneís gift until you know exactly what you are going to buy.”
The holidays are upon us, bringing all those personal and family images and sensations we cherish. But for many of us, there are a few not-so-joyous holiday sights (a purse overflowing with credit card receipts) and sounds (the ca-ching! of cash registers marking our escalating debt). These negatives can easily outweigh all that we love about the holiday season, especially during this less-than-prosperous economic period.
Overall, the Great†Recession brought about a renewed dedication to saving. Before the recession, our national personal savings rate was close to zero, and now itís around 3 percent. But it is very important that you not let your holiday spending zap all of the saving progress you made during the year.
Whether itís a dedication to the gift-giving tradition, a sense of obligation, or a feeling that the holidays entitle us to have a little more fun than usual, too many of us seem to turn a blind eye to the budget-busting reality of all that spending over just a couple of months. Donít let excessive holiday spending cause any unnecessary financial stress for you and your family.
What if you could have a wonderful, memorable holiday and avoid the financial hangover afterwards? The following tips will help keep your holiday spending in check.
1. Find an alternative to gift-giving during the holidays. Many people feel they have to give gifts during the holidays, either because itís a family tradition or because they know their friends and relatives have gotten gifts for them. There are plenty of great ways to trade in this tradition for another one that is even more meaningful, and chances are your family and friends will be happy to save gift-buying dough as well.
Instead of exchanging gifts, your family members might want to pool their money and spend it on a holiday outing. If you have kids, youíll probably want to get them a little something, but set strict spending limits. Instead of piling up the toys, let each child choose an outing or event that he or she gets to spend with you one-on-one. Kids will look back on the valuable time youíve spent together a lot more fondly than they will any toy or video game they use a couple of times and then toss aside.
2. If you must buy gifts, cut your expenses elsewhere as necessary. Perhaps youíd rather dine out or go to the movies less, or maybe you can forego that new pair of boots youíve been wanting for yourself in order to afford gifts for the grandparents. It doesnít matter where you make cuts, just that you make them. Keeping your other spending under control while youíre out there doing your shopping can be a challenge, but keep repeating to yourself the importance of not over-spending.
3. Set a budget and keep tabs on what you are spending. While youíre doing your holiday shopping, your new best friends should be your checkbook register, credit card statements, and all of your receipts. Itís easy to get into a spending rhythm when shopping for yourself or others, and thatís why you need to physically write down every purchase and make sure you donít go over your budget. When you start to add up everything youíre spending, you may be shocked at what all those expenses from this store and that store add up to be. Donít forget about all those "necessary" holiday extras. Most people donít realize that by the time you buy all the wrapping paper, cards, decorations, etc., itís added up to a ridiculous amount.
4. Plan what you are going to buy, and donít get any extras! Particularly during the holidays, companies pull out their most appealing packaging in hopes of snagging the eyes of shoppers. Thatís why along with your budget, youíre going to want to take an exact list of what you want to buy for your gift recipients. Donít go shopping for someoneís gift until you know exactly what you are going to buy.
Itís very easy to go in with no plan, see something you like, and get it simply because you have no idea what else to get for a hard-to-buy-for relativeódespite the giftís significant price tag. Another temptation that the list will help you squelch is the desire to buy those little knickknacks here and there that you think will make nice small additions to the gifts youíve purchased. Very rarely are things like this necessary, and if youíve got your list in hand, it will be easier for you to pass them by without hesitation.
5. Use the season to set a good example for your kids. Your kids learn about money from you. If they see you spending left and right during the holiday season, the lesson they come away with isnít going to be a good one. During the holidays, itís very easy for the "gimmee gimmee gimmee" materialistic attitude to get out of control. After all, kids are bombarded with constant advertisements for toys, clothes, and the latest gadgets you can be guaranteed theyíll want (or at least think they do!).
Thereís plenty you can do to help kids appreciate the true meaning of the holidays. Have them give some of their money to a local charity, participate in a program in which they buy and wrap gifts for underprivileged kids, or volunteer at a soup kitchen. It can be an eye-opening experience for kids to see that not everyone has enough money to purchase what they desire.
6. Watch out for deals that seem too good to be true. Retailers run all sorts of specials to induce consumers to buy now, and the holidays offer these companies easy prey in the form of deal-seeking, cash-strapped consumers. For example, furniture stores frequently offer that if you buy now, you donít have to pay a thing for a year, and you might even get free delivery. This sort of "push" marketing can make it harder for you to say "no."
This is just one example of how stores coax in shoppers. Always remember that free financing for, say, a year is not a huge cost to the dealer, but it is a cost, and if you forgo it, you should be able to negotiate a lower purchase price. Retailers find that buyers are less likely to negotiate the price if they are getting a short-term financing break. Read the fine print on any deal you are considering taking before you go to the store to make the purchase. It can be even harder to say no once you get to the store, so youíll want to know what you are in for before you get there. If you accept the offer, make sure you have a plan to pay it off in the allotted time
7. Leave the plastic at home. Many of us can explain away spending so much on gifts because we simply charge everything and reason that we can pay it off gradually after the holidays. This is a great way to create a never-ending cycle of consumer debt for yourself. It only creates unnecessary financial stress for you after the holidays.
Use your budget to figure out how you can purchase the gifts you want to purchase without putting them on your credit card. If you are so cash-strapped that you think it will be difficult to avoid charging gifts, then you may want to sit down with other friends and family and propose a limit on how much gifts can cost this yearóor propose no adult gift exchanges at all. Far from being disappointed, itís likely theyíll view this reprieve from gift-buying as a gift in its own right.
8. Invest in your kidsí financial futures. It may not seem as exciting to your kids as a new iPod, but a contribution to their financial well-being will be appreciated long after such expensive "toys" are obsolete. Have the grandparents contribute to a college tuition fund or savings account rather than buy them more stuff they donít need. Or make one of your gifts to your kids a stock fund portfolio that can start accruing now. Also, make them aware of the budgets and tools you are using to keep your spending in check. The holidays are a great time for them to truly learn that money doesnít grow on trees.
9. Give the gift of time to your kids. Often, parents buy gifts for their kids with the best of intentions. Either you donít want to deprive them of the toys and gadgets all of their friends have, or you want to give them the things you didnít have as a kid.
Both of these tendencies are perfectly understandable, but Iíve found that parents who buy too much for their kids often have difficulty changing the habit. The holiday season offers great opportunities for you to show your kids how much you love and care for them. For example, you can make time with them each week to watch a holiday film or TV show, go on a walk to see your neighborsí holiday lights and decorations, or emphasize that giving back message again and take them caroling at a local retirement home. All of these activities cost next to nothing, and they will be fun for the kids and for you!
10. Remember that meaningful gifts donít necessarily have a big price tag. Sure, it might be nice to give your mom a brand new TV, but there are other things out there that will be even more meaningful and enjoyable for herólike a photo album with candid shots of the grandkids or something theyíve made for her themselves. If you are looking to give a gift that truly means something and that will keep its value for years to come, you are better off looking for nonmaterial gifts to give than something your gift recipients could get themselves at the local big box store.
Money can easily become the focus of the holidays when it should be the last thing you are thinking about. By keeping your spending under control, you can have a great holiday and avoid the sick feeling in the pit of your stomach that occurs when you start getting those credit card bills in the mail. If you prepare properly, you can achieve a happy balance of spending and saving during the holiday season. Thatís a great gift in and of itself, for both you and the people you love.
Eric Tyson is an internationally acclaimed and bestselling personal finance book author, syndicated columnist, and speaker. Despite being handicapped by an MBA from the Stanford Graduate School of Business and a BS in economics and biology from Yale University, Eric remains a master of "keeping it simple." He is the author of five national bestselling books, including "Personal Finance For Dummies," "Investing For Dummies," and "Home Buying For Dummies" (coauthor), among others, which are all published by John Wiley & Sons, Inc. Personal Finance For Dummies was awarded the Benjamin Franklin Award for best business book of the year. You can get more information at www.erictyson.com.