You've heard it before -- plan your holiday spending so you won't have debt come January. But for most of us, the holiday season is tough on our budgets. Various 2014 surveys put average household holiday spending around $600-$700. Most of us know it doesn't take long to exceed that limit.
To avoid the January money hangover, you'll need smart planning and execution throughout the year. Developing a long-term system that fits your pattern of earning and spending is necessary. And yes, personal sacrifice might be part of the plan. Start planning what your personal budget can tolerate before you start spending.
Consider giving these ideas a try:
Planning:
1. Before you make a list, check your financial health. Many people separate their holiday spending from the spending they do all year. Wrong. If you don't have a budget that tracks all your year-round spending, it's time to make a budget that tracks your holiday spending alone. Key question: can you pay for all holiday gifts in cash or within a short billing period? If not, adjust spending drastically downward until diligent budgeting helps you reach your goal.
2. Go after your everyday expenses. Want to afford the holidays? Target some bad, expensive habits. Quit smoking or spending money on expensive nights out. Cook at home and bring your lunch to work. Use public transportation. Compare and cut your auto and home insurance premiums. Turn down the thermostat, dump magazine subscriptions, gym memberships and any other budget item you're not using. You'll find you'll build savings fast.
3. Consider experiences, not gifts. It's tough to deny certain friends and family members actual gifts during the holidays. But consider a discussion about fun, interesting or generous things to do during the next 12 months that can replace excessive spending. Economically planned family trips, activities or donated labor to loved ones who need it can be fun and cut spending at the same time.
4. Consolidate or eliminate gifts for grownups. Consider suggesting a gift swap instead of buying everyone in your family individual gifts -- or bypass gifts for adults altogether.
5. Start your holiday list early. Begin 2015 with a resolution to start a notebook or computer file where you store the needs and wants of people you care about. Think about everything -- gifts, decorations and entertaining. It all costs money. And listen carefully for hints -- not only for gifts, but needed chores and other meaningful things you can give with the gift of time.
6. Browse before you buy. How well do you know the bricks-and-mortar and online stores you'll shop at for the holiday season? As you're building your gift budget and entertainment plan, sign up online for year-round coupons and discounts that might help you buy necessary items cheap and early.
Execution:
7. Create your own Holiday Club account. What's the best way to spend for the holidays? Using cash. Folks of a certain age remember Holiday Clubs -- old-fashioned savings accounts with pretty red passbooks paying low-to-no interest in return. Today, try a DIY solution. Online savings or money market accounts don't pay much interest given today's rate environment, but they typically pay more than accounts at traditional bank branches. Even better, you can make deposits on your home computer throughout the year until you reach your goal. Just remember: no touching until you're ready to buy.
8. Consider gift cards. Gift cards can be tricky because the recipient will always know what you've spent. But if the recipient loves the store in question, it means you're giving them something they'll definitely use while you stay on budget and save time. Just make sure you save the gift receipt for the recipient in case there's a problem with the card. And keep a look out for retailers who offer gift cards as a bonus in case that store is a favorite with someone on your list.
9. Watch gas and shipping. Smart shoppers weigh the value of mall trips versus online shopping and keep an eagle eye for advertised online and shipping discounts. Sign up for special deals and coupons, consolidate in-person trips to stores and make sure you review return policies at online and brick-and-mortar stores before you buy. Paying return fees or missing a window to return a gift entirely can cost big money.
10. Keep good records. Whether you track your finances on paper or on a computer, develop a system that allows you to match your holiday list to what you spend every year. Good record-keeping not only allows you to track the numbers, but also prevents you from duplicating gifts or overspending year to year. And it's always a good idea to keep a list of what you get from others to not only make sure your spending is roughly equal, but also to make sure you're thanking people appropriately.
Bottom line: It's called the holiday season, not the spending season. If you enjoy traditional gift-giving, shape your finances throughout the year to make it happen. If you are facing financial problems or simply want to make a change in old spending routines, share that information with loved ones. They might respond with excellent suggestions.
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