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Monday, November 30, 2009

3 Rules for Holiday Spending - November 29, 2009

There is no one that has not been touched by the current recession. Past habits of overspending will not serve us this year and it’s imperative that we begin next year in better financial shape. To make sure that this goal becomes your reality, follow these three rules for holiday spending:

Don’t spend money you don’t have. If history serves as an indicator, most people will face January 2010 with more bills than money because of holiday gift buying. Your goal should be the opposite. Don’t count on future paychecks to cover holiday spending. Take a moment to check your bank account balances right now…then set a goal for higher balances, this time in January. To achieve this, you’ll need to do a little planning. Take a moment to determine how much money will be coming in between now and then plus calculate your upcoming expenses, paying particular attention to any non-periodic expenses such as an insurance premium payment. Once you’ve added up the money coming in and subtracted the expenses going out, decide how much you can afford to spend on gifts while creating higher account balances in January.
Make a list. The next step is to make a list of everyone you plan to give a gift. This is a critical step because it helps give you a perspective of how much you can afford to spend on any one person since you now know the total amount of money available. You might even want to pencil in estimated dollar amounts by each person’s name. Make sure that the total does not exceed your total from rule number one above.
Follow the money. Choose one of two methods to make certain that you stay within your total spending goal. By way of example, let’s assume that under rule #1, you’ve decided on a budget of $1,500 for your holiday gift giving. You can get cash and put it in a separate envelope. Once the envelope is empty, you’re done. An alternative is to track your spending on a separate piece of paper. Down the left side of the page, make a list of all the people you plan to give gifts. At the top right of the page, enter $1,500. As you buy gifts, enter the amount beside the person’s name and then subtract that amount from your $1,500 total… keeping a running, declining balance. Stop spending once you hit $0.

Great deals should be plentiful this season as retailers anticipate that shoppers are going to focus on bargain shopping. To get the best deals, compare pricing by checking your newspaper ad inserts, store ads and Internet. Once you run through your budget, consider what I call, ‘love’ gifts. This could include gifts of time such as baby sitting or chores; bakery goods; the gift of a family heirloom; or it could be as simple as a hand-written heart-felt letter.

Ultimately, the best gift of the holidays is spending time with people you care about. Enjoy the comradery and eggnog. By following these three rules for holiday spending you’ll guarantee you won’t end up with a financial hangover come January.

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