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 Avoiding the Financial Holiday Hangover
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As the holiday season approaches, many people are filled with a
sense of anticipation, excitement, and financial panic. Every year we resolve to
not repeat the same spending sprees, yet how many people are STILL paying off
those credit card balances? You promised yourself you would pay the debt off
within two or three months. Six or eight months later (or more), you're still
paying, and those items that seemed like such bargains end up costing you 10 to
20% more than you thought, due to credit card interest. For many of us, this
debt pattern is repeated year after year. This year the “holiday hangover” could
push many families into financial ruin. NOW is the time to plan for fiscal
comfort.
While there are times when incurring credit card debt makes
sense, holiday gift-buying is not one of them. Using credit cards often leads to
impulse spending, overspending, and increased debt. A better approach is to save
small amounts of money throughout the year in a special holiday gift fund, make
a list of all the people you'd like to give gifts to and how much you can afford
to spend on each one, and pay cash. When the cash is gone, you're done
shopping.
If saving money
throughout the year seems difficult, join an old-fashioned Holiday Savings Club,
still offered by smaller community banks and credit unions. You can put a
manageable amount away each pay period, often deducted automatically from your
paycheck. The account usually earns interest at the regular savings account
rate. In October, November, or December, the money gets transferred to your
regular checking account and you're ready to go shopping!
Keep a Lid on Holiday Spending
Here are four simple steps to help you stay out of debt this
holiday season and avoid that financial “holiday hangover.”
- Set spending limits--Look at your monthly budget and figure
out how much you can realistically afford to set aside towards holiday gift
giving, without going into debt. Your intentions may be good, but the reality
is that most people have a depressing amount of debt after the holidays and
are not able to pay it off in as timely a manner as they had hoped.
- Make a list--Follow Santa's example. Make a list of all the
people you need or want to buy gifts for, including small gifts for
babysitters, teachers, newspaper deliverers, etc. These small gifts can add up
and are often the cause of going over your gift budget. Include money you'll
spend on holiday cards, postage, holiday parties, decorations, holiday
entertainment, etc.
- Set a limit--Decide how much you will spend on each person
on your gift list, then add everything up and make sure it doesn't exceed your
overall spending limit. Try to allow a cushion for unexpected items or price
fluctuations.
- Decide where to shop--As important as deciding what
you're going to buy is deciding where you're going to buy it. If you
don't wait until the last minute, you'll have time to comparison shop. Prices
fluctuate significantly from store to store and from one month to another.
Stores start cutting prices 10 to 25% on holiday items like decorations,
gifts, and winter clothing the week before Thanksgiving. As Christmas
approaches, some items are marked down as much as 40% but selections are
limited. You'll need to decide whether price or selection is more important to
you and time your shopping accordingly.
Follow these simple steps and you'll avoid the nagging feeling
that you've overspent on Christmas or other holiday gifts. You'll also avoid the
struggle to pay off the credit card bills for months to come. Instead you'll
feel in control and free of the dreaded financial “holiday
hangover.” | |
