Happy Holidays Now and in January

December 01, 2014

The holiday season is officially here and I can honestly say that it may take me a few days to fully recover from Thanksgiving dinner (and a few rounds of leftovers). Despite spending about 20 hours in a car, it was fun setting some time aside to do nothing but eat, watch football, and express a little gratitude. In our household, the peaceful tradition of starting an Advent calendar on December 1st is usually countered by the hectic activity of trying to coordinate family logistics for the next month.

It is also a time to try to anticipate the financial impact of these holiday events. While we all want to enjoy holiday parties, family gatherings, and gift exchanges, oftentimes we overindulge and the joys of the holidays turn into the financial hangover of big credit card bills in January. Here are some tips on ways to make the most of the holidays and beyond:

Don’t buy a gift for cousin Eddie. At some point, families get too large to buy a gift for everyone. Consider drawing names for more distant relatives so that everyone only has to buy one gift instead of ten. Another option is to consider giving a charitable gift in honor of family members. This can be especially effective for that impossible to shop for person in your life that seemingly has everything. My crew enjoys taking time to purposefully select charitable organizations that not only make a difference but have a personal connection to the person we are honoring with the donation.

Set a budget and stick to it! Before any gifts are purchased, go through and figure out who you will be buying for and what you can afford to spend for each person and then total it up. If the total is too much, cut back on what you’re spending per person or who you’re buying for. Use a tracking method such as a spreadsheet or an online budgeting tool like mint.com or YNAB.com. If you have trouble resisting those last minute gifts that resemble impulse buys, consider pulling out cash for gift purchases using an envelope system to help you stick with your intended limits.

Roll with the challenges of budgeting during the holidays. A major mistake many people make with budgeting is thinking that everything has to be perfect In order for a spending plan to work, it must be personal and it should always allow some room for flexibility. What many people do during the holidays is forget about budgeting altogether with an “I’ll deal with it later” mindset and with good intentions of changing things in the New Year.

Avoid that temptation and as the people at YNAB like to say – “roll with the punches.” If you find that your holiday spending is starting to exceed your spending limits, realize that plans change and it’s okay. This doesn’t mean ignore the issue. It just means you should revisit your spending plan and identify areas to move money around to account for overspending in one spending category.

Don’t forget the turkey. One common mistake is that people forget to add up the non-gift costs of the holidays – the turkey for Thanksgiving, the food and drinks for parties and the travel to grandma’s house. Add this into your holiday budget before you go shopping.

Make it personal. Don’t be afraid to use your own time and talents to create a meaningful gift. Homemade treats carry more meaning than a holiday sweater. Many times a handcrafted gift becomes a precious keepsake. If you really want to get personal and mix things up this year, you can forgo focusing on stuff and give the gift of personal experiences. You could even make a personalized gift card, coupon book, or brief video to deliver your message.

Don’t fear the gift card. On the other hand, sometimes a gift card can be more economical. It’s better to buy a $25 gift card for that hard to buy for person than spend a lot of time searching in vain for the “perfect” gift. This can also help them get more for the money with after-Christmas sales. Many merchants offer deals where you can get a $5 or $10 gift card for yourself when buying one as a gift.

Plan for next year. Once you are ready for this year, the focus should shift towards planning ahead for 2015. Now is a perfect time to begin establishing a planned spending account to set aside funds for irregular expenses that don’t hit on a monthly basis. Some banks and most credit unions will let you deposit money from every check and then make the cash available to you in November for holiday shopping. You can also set up an automatic transfer to a Christmas club or regular savings account.

Don’t wait until January to deal with the financial decisions you make during the holidays. The best time to plan is now and if your Black Friday or Cyber Monday shopping experiences got things a little off track, remember to roll with it and adapt (or create) your spending plan. Here are some additional resources you may find helpful this holiday season:

Resources:

Do you have any unique financial planning tips for the holidays? Feel free to share your comments or ideas below.