Saying No-No-No to Holiday Overspending!
Saying No-No-No to Holiday Overspending
There are many holiday traditions which are beautiful, meaningful, and worth repeating year after year. However, the tradition of holiday overspending has become all too common among American consumers.
The temptation to overspend during the holidays is understandable. You’ve probably heard (or told yourself) every excuse in the book given to try to justify this bad habit. "I want to do something really special for my loved one this year because he/she has been going through a difficult time. I'm not worried about charging gifts on my credit cards because I will pay the balances off in a few months with my tax refund. Money is tight during the rest of year so my family and I deserve to have a little fun during the holidays."
It is much easier for consumers to talk themselves into overspending during the holidays than at any other time of the year. Social pressure, pressure to please loved ones (whether the pressure is real or perceived), and incessant retail marketing can all make it difficult to stick to a spending budget which you can actually afford. However, the truth is you don’t have to fall into the debt trap in order to have a happy and meaningful holiday season with the people you love.
The single most effective way to swear off holiday overspending once and for all - and to actually achieve this goal - is to start with a plan. You probably already understand that having a written budget to follow for your monthly expenses is essential to financial and credit success. However, with all of the extra expenses present during the holiday season, it is also important to have a separate, written budget for holiday spending as well.
How It Works
When starting your holiday budget, begin by listing the amount of money which is actually available for spending, not the expenses. Starting with the amount of money you can afford to spend (without going into debt or dipping into non-holiday savings) will help you to build the most effective holiday budget possible.
Let's say that you determine your total available spending limit for the holidays should be $1,000 or less. The next step should be to divide those funds into spending categories such as charitable giving, Christmas presents, holiday treats and meals, decorations, and unplanned expenses. The funds can be allocated within the spending categories however you see fit. Here is a possible example:
Charitable Giving - $100 (10% of available funds)
Christmas Presents - $550 (55% of available funds)
Holiday Treats and Meals - $200 (20% of available funds)
Decorations - $50 (5% of available funds)
Unplanned Expenses - $100 (10% of available funds)
Once you have separated your available funds into separate spending categories, you can move on to determine how much you will spend for each person on your Christmas gift list. One of my favorite strategies for budgeting Christmas gifts is to list each person for whom you wish to buy a gift in their order of importance. Next you can determine which percentage of funds you wish to spend on each person and calculate those percentages against your pre-set budget to find out your gift "allowance" for everyone on the list. Here is an example.
Spouse - 20% ($110 in the example budget)
Child #1 - 15% ($82.50 in the example budget)
Child #2 - 15% ($82.50 in the example budget)
Grandchild #1 - 10% ($55 in the example budget)
Grandchild #2 - 10% ($55 in the example budget)
4 Family Members - 5% each ($27.50 each—$110 total— in the example budget)
10 Misc. Friends, Teachers, etc. - 1% each ($5.50 each—$55 total—in the example budget)
CLICK HERE for some great tips on how to stretch your Christmas budget to the max.
Make the commitment to set a budget and stick to it and you will make the holiday immensely more enjoyable for yourself and your family this year. As a bonus you can give yourself and your family the gift of starting the New Year off on the right foot financially, without a Christmas overspending hangover.
Michelle Black, Founder of CreditWriter.com and HerCreditMatters.com, is a leading credit expert, author, writer, and speaker with over a decade and a half of experience in the credit industry. She is an expert on credit reporting, credit scoring, identity theft, financing, budgeting, and debt eradication. You can connect with Michelle on Twitter (@MichelleLBlack) and Instagram (@CreditWriter).