Friday, December 14, 2007

Personal Finance: Holiday Spending

JLB: Make it Through the Holidays, Stress and Debt Free

Why are holidays stressful? Work, family, traveling, gifts for Mom, Dad, siblings, pets, significant others, bosses, Secret Santa, Billy, Bob, Joe and Sue..and the list goes on. How many people out there get all their shopping done, have a great holiday season and about 48hours after the New Year’s hangover goes away, get their credit card statement either in the mail or online? How many people wait a couple of days to open it and feel a pit in their stomach as soon as they see it ‘because they are scared of what they are going to see when they open it'?

If you know exactly what I’m talking about, YOU’RE NOT ALONE. Statistics say that the average American spent $1200 on holiday gifts last year. For most of us, $1200 is A LOT of money. How much do you plan to spend? Have you already saved for it or are you going to "make up for it" later?

Here are some tips to avoid that pit in your stomach come January:
  • Create a holiday budget - Before you buy anything, assess how much you want (and can afford) to spend on holiday gifts in total. If you’ve been saving a few extra bucks from recent paychecks, good job! You've got the right approach by preparing yourself for greater spending!!

  • Create a list of people you need to buy for.

  • Assign a dollar amount to each person – WRITE IT DOWN.

  • When you shop, stick to the amount you put down in writing (this includes, tax, shipping & handling and gift wrap fees). That sweater that you thought was $29.99 for Aunt Sue all of a sudden costs $46 with all of the above, without you even realizing it.

  • Keep your receipts and attach them to the list where you wrote down all of the amounts – it keeps you honest. That’s why you WROTE DOWN your list and amounts.

  • Don’t spend money before you’ve got it. Yes, its holiday bonus time… but don't let that fool you. Here’s the common internal monologue - "this means I can get the new ____ I’ve been wanting for months!! I get my bonus in the next paycheck, I’ll be fine.” Oops, your bonus and the amount taken out for taxes are FAR less than you anticipated (especially because bonuses are ALWAYS taxed at a higher rate).

  • Making gifts is an easy way to save money – make custom CD’s off of iTunes, knit scarves, make candles out of peeled crayons, or make a personal gift card to redeem for a home improvement project. Plus, you get extra points because handmade gifts really "show that you care."

  • Realize that people don’t judge you based on the gift you give or how much you spend. It really is the THOUGHT and meaning behind the gift that counts. SO MANY people overspend (not just on gifts) to give the impression they are making more money than they are and that “life is great”, when sometimes, it's not.

  • If this column got to you too late and you’ve already overspent – create a PLAN for paying off the holiday debt. On a piece of paper or in excel, write down how soon you want to have everything paid off and how much you are going to pay per month to get it done. Example – I want my holiday bills of $585 to be paid off by the end of February. This means that for the next four paychecks I will be paying $150 to my credit card bill. Interest and fees from carrying a balance on your credit card can add up fast – beware!

Remember, the only thing that really matters during the holiday season is showing that you love and care about the people around you. Money should never get in the way of that. They probably don't need more stuff anyway, and would rather you be happy without having to endure the stress or the debt of over-spending.

Happy Holidays!!

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