Over one shoulder hovers an elf, devilishly waving a credit card, goading you to buy! buy! buy! this holiday season, without regard to the consequences. Over the other shoulder floats an angelic elf, strumming a harp, urging you to be generous yet sensible in your holiday spending.
All the screaming deals, deep discounts and relentless advertising make it easy for consumers to ignore financial reality and their conscience during the holiday shopping season. Yet according to personal finance experts, people who have the wherewithal to resist temptation and stick to sensible spending habits during the holidays will likely come out in much better financial shape than their budgets-are-made-to-be-broken counterparts.
Bloated bills, a depleted bank account, a mountain of debt and a guilty conscience await consumers who choose the devil-may-care approach to holiday spending. “A lot of people end up feeling deep regret after the holidays,” explains, Christine Parker, CFP®, of Parker Financial in La Plata, Md., “because they spent way too much on gift-gifting, but also on things like entertaining, decorating and going out to eat. It can quickly get out of hand.”
On the other hand, those who make the effort to set — and stick to — holiday spending limits put themselves in position to fully enjoy the magic of the season, without gnawing worries about their holiday spending splurge. Throughout the year it is important to track your income and fixed/variable expenses. This will help you avoid overspending during the holiday season.
And, just as importantly, they can do so without curbing their holiday spirit or compromising their generosity. Here’s how:
1. Determine how much you can spend this holiday season, taking into account decorating, entertaining, dining, travel, gifts for family and friends, etc.
2. Working off that total, draft a detailed budget before you start shopping, with line items for all the expenses that you factored into your total budgeted amount.
3. Get creative to shave costs. If you’re an artsy-craftsy type, make gifts and decorations instead of buying them. Rather than dining out, host a dinner party at home and ask your guests to bring something to share.
4. Resist temptation. As good as it feels to be generous, fight the impulse to overspend, even if it’s a screaming deal.
5. Be flexible. Despite all your best intentions, you may end up spending more than you planned on an item. Rather than wallowing in guilt, find places in your budget to cut to offset the splurge.
6. Use cash instead of plastic whenever possible. With cash, you can’t spend what you don’t have.
7. Give yourself incentive to stick to the plan. Think of a way to reward yourself for staying within budget — a meal at your favorite restaurant, a spa treatment, etc.
BOILERPLATE
October 2012 — This column is provided by the Financial Planning Association® (FPA®) of Massachusetts, the leadership and advocacy organization connecting those who provide, support and benefit from professional financial planning. FPA is the community that fosters the value of financial planning and advances the financial planning profession and its members demonstrate and support a professional commitment to education and a client-centered financial planning process. Please credit FPA of Massachusetts if you use this column in whole or in part.
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