It’s enough summer flew by but pretty soon, it will be the time of year where your money can be funny and that change oh so strange….
Sigh. It’s the time of year when you want to treat the ones you love but your personal property taxes may be due amongst other expenses you don’t expect! Budgeting for the holidays is critical but planning ahead – even before you do the budget - is a must to avoid post-holiday debt.
In fact, reports say in recent years, Americans spent an average of $800 on holiday-related expenses and don’t have the cash. So what do they do? Pull out the plastic. It may seem okay, but let’s break it down. Let’s say you charge about $1,000. Instead of paying the balance in full, you make minimum monthly payments with an APR of 18-20%. If you do that, you’ll still be paying for Christmas 2014 in 2026 or so!
The National Foundation for Credit Counseling gives tips on what you can do now before the holidays roll around.
Develop a spending budget. Write down household and personal expenses for November and December. For each month, subtract the total amount of expenses from your monthly take-home pay. The amount left over each month becomes a starting point to gauge how much you can afford to spend. Make a list of purchases from gifts to decorations.
Make a list. Follow Santa's example. Make a list of all the people you need or want to buy gifts for, including small gifts for babysitters, teachers, newspaper deliverers, etc. These small gifts can add up and are often the cause of going over your gift budget. Include money you'll spend on Christmas cards, postage, holiday parties, decorations, holiday entertainment, etc.
Consider creative gift-giving. When it comes to gifts, some people still believe, it's the thought that counts. Consider gifts that have a personal touch, such as hand-made and homemade gifts like tapestries, quilts, pastries or other prepared foods. Don't forget about fruit baskets, which are both economical and healthy.
Look for shopping deals. Check out retail sales, special discounts and coupons in circulars or newspapers and deals online. Consider purchasing holiday decorations in-bulk and splitting the costs with friends and family members. These deals can add up to substantial savings.
Avoid last-minute shopping. Shopping under stress can lead to more spending. Plan your shopping trips in advance and shop as early as possible before the December holidays.
Pay with cash when possible and spend wisely. Stick to your spending limit. Pay with cash when possible and leave your checkbook and credit cards at home to avoid temptations for unplanned and unnecessary purchases. If using credit is a must, limit purchases to one card. Use the credit card with the lowest interest rate and don't use more credit than you can afford to pay off in 90 days or less. Remember, credit card debt amounts to a short-term loan. The longer the length of the loan, the more you will pay.
Avoid the post-holiday debt hangover and don’t overspend: Tally the receipts from all holiday expenses, including gifts, postage, meals, entertainment and decorations. Once you've completed your shopping list, stop shopping! More mall time can amount to more spending.
Other tips they offer via Black Enterprise include:
Before trimming the tree, trim everyday spending. Review current spending looking for leaks. Plug those leaks and use the found money for holiday spending. Amount saved by Dec. 25 at $1 per day: $125.
Adjust the W-4 to accurately reflect the amount of taxes owed. The average income tax refund in recent years has been close to $3,000, but Uncle Sam only returns that money in April, long after the holiday bills should have been paid. Amount saved by Dec. 25 at $250 per month: $1,250.
Commit to shaving $10 off of 10 spending categories. Some obligations such as rent, mortgage, and car payments are fixed. There are, however, other categories that offer a great deal of flexibility. Cut back $10 each month on categories such as food, clothing, gas, utilities, and entertainment without feeling deprived. Amount saved by Dec. 25 at $100 per month: $500.
Sell unused items. Since others are also shopping, this is the perfect time of year to sell items that haven’t been used for the past year. Amount saved by Dec. 25: $100.
Open a separate holiday savings account. Don’t mingle the holiday money with existing savings or checking accounts, as it could easily get spent on other items. Amount saved by Dec. 25: $1,000.
I know the holidays is when we give but we can’t keep giving and never get rid of the debt afterwards. We can give gifts but be smarter, more creative, and spend less while celebrating the ones we love.
Got leftover holiday debt? This year send everyone a pound cake. Why make things worse? I’m just sayin’…