During the holidays we want our love ones to be happy but we must remember money doesn’t buy happiness. However, it does buy a lot of gifts which can lead to a stressful time. Below are some strategies to help combat financial stress:
Plan with a Budget
One of the most helpful ways to plan for holiday spending is to create a realistic budget based on your current financial obligations. By creating a budget that includes your monthly expenditures and income, you will then be able to pinpoint how much you are able to spend for the holiday season. Once you have completed your monthly budget, you should then create a budget for the holiday. Make sure to name it “Holiday Budget”. Here are some suggestions for creating your “Holiday Budget”:
* Make a list of your holiday plans for an example holiday party, traveling, gifts for family and friends and/or donations to charities.
* Once you have established your list, your next task is to determine how much you can allocate to each item on the list. One thing you should think about when sorting through your list is whether or not some of the gifts, party decorations and food are DIY projects. DIY projects can be fun, simple and inexpensive. And in some instances holds more of a value then something you purchased.
* You should also do some research to compare prices, this may take some time but in the end you will find it very rewarding.
* Try to avoid shopping in a rush or impulsively. Plan your shopping trips strategically, looking over sales ads, coupons, BOGOs and if possible using store point’s rewards.
Make a plan and stick to it! The holidays are times to celebrate with love ones while making meaningful memories that will last a life time, not a time to look back and have regrets over how much it cost.
Yes to Cash…No to Plastic
When using credit cards during the holiday season it is very easy to overextend yourself and incur more debt than you can afford to repay. Instead, you should try to only pay in cash, that way when you run out, you run out. Keeping track of how much you are spending is much easier if you have the money physically on hand. Here are some questions to ask yourself before using your credit card(s):
* Can I pay this balance off in full within my grace period? If you do not pay off your credit card balance in full within the grace period, you are charged interest from the purchase date until the day you pay off your balance. If you make only minimum payments, you could still be paying for this year’s holiday when the next holiday season rolls around. The interest charges could easily be greater than any sales price you obtained if you do not pay off your credit card balance.
* Can I afford any additional expenses added to my budget for the next twelve months? If you are already working with a tight monthly budget, you probably cannot afford an additional $50 added to your budget for the next twelve months. However, if you have charged beyond your ability to pay, the credit card issuer will take action to collect the debt. The action may be limited to reporting the debt to credit bureaus, increasing your interest rate to an even higher penalty rate, or it may involve taking legal action.
* Can I purchase this after December 25th? Typically gift giving is done on Christmas and not days and weeks after. So perhaps give gift cards that can be used at the after Christmas sales.
* Can I purchase some of my gifts by using layaway programs? Layaways are define as: a system of paying a deposit to secure an item for later purchase. It allows you to pay a little bit each week, interest free, so by the time you are ready to give the gift(s) it is already paid for.
Understanding now the effects of a “buy now, pay later” mentality and the repercussions it has on your finances, can save you from financial hardship in the future.
The Bottom Line
You don't have to go into debt to have a happy and memorable holiday season. Keeping your finances under control can help you keep the other challenging aspects of the holidays under control as well. If you're not stressed out, you're less likely to overspend, overeat and/or lose patience with those you love. Perhaps a “happier, less stressful you” will be the best gift that you bring to any gathering this holiday season. Remember the holiday is a time to enjoy family, friends and surroundings but it shouldn't be in sacrifice of your financial future.