The holidays are filled with the temptation to go overboard with spending. 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 the 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. Financial expert Eric Tyson offers advice on how to manage your holiday spending.“Overall, the recession has brought about a renewed dedication to saving,” says Tyson, author of Personal Finance for Dummies, 6th Edition. “Before the recession, our national personal savings rate was close to zero, and now it’s around five 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 it’s 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,” says Tyson. “Don’t 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? Tyson provides great tips on how to keep your holiday spending in check.
Find an alternative to gift-giving during the holidays.Instead of exchanging gifts, your family members might want to pool their money and spend it on a holiday outing. Kids will look back on the valuable time you’ve spent together a lot more fondly than they will any toy or video game they use a couple of times and then toss aside.
If you must buy gifts, cut your expenses elsewhere as necessary. It doesn’t matter where you make cuts, just that you make them. Keeping your other spending under control while you’re out there doing your shopping can be a challenge, but just keep repeating to yourself the importance of not overspending.
Set a budget and keep tabs on what you are spending. When you start to add up everything you’re spending, you may be shocked at what all those expenses from this store and that store add up to. And don’t forget about all those “necessary” holiday extras. Most people don’t budget their shopping and don’t realize that by the time you buy all the presents, plus wrapping paper, cards, decorations, etc., it’s added up to a ridiculous amount. Having a budget that you know you must stick to will help keep your impulse spending from getting out of hand and will help you hone in on the most reasonably priced holiday items.
Plan what you are going to buy, and don’t get any extras. It’s very easy to go in without a plan, see something you like, and get it simply because you have no idea what else to get for a hard-to-buy-for relative despite the gift’s 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 you’ve purchased.
Use the season to set a good example for your kids. There’s 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 have an enjoyable holiday.
Watch out for deals that seem too good to be true. 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.
Leave the plastic at home. 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 year — or propose no adult gift exchanges at all.
Invest in your kids’ financial futures. Have the grandparents contribute to a college tuition fund or savings account rather than buy them more stuff they don’t 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.
Give the gift of time to your kids. Both of these tendencies are perfectly understandable, but I’ve 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 neighbors’ 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.
Remember that meaningful gifts don’t necessarily have a big price tag. 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 for something your gift recipients could get themselves at the local big box store.
