It’s that time of year again. There’s excitement in the air, discussions and twitter posts about all that we’re grateful for, and holiday decorations popping up in the stores so fast that you’d think we all but missed Thanksgiving already. The holidays are officially upon us, which means so is the season for gift giving, additional expenses, and trying to hold tight to our spending plan all the way into the New Year.
One key thing to remember with holiday gifts and expenses is to have a clear-cut strategy for purchases. By following the steps listed below, not only can you keep yourself on track with holiday spending, but you can also prevent a post-holiday spending hangover from wrecking havoc on your finances:
- Know your current expenses. Ensure you have a detailed spending plan in place and are aware of where your money is currently being allocated. Utilize a website such as www.mint.com or a simple excel spreadsheet to track your fixed and discretionary expenses. Once you’ve determined where your money is currently being spent, you can begin to pinpoint areas within your current budget where there is flexibility to trim back. By cutting back on certain expenses now, you can begin to save and free up additional funds for holiday purchases.
- Create a list. Check it twice. Draft a holiday budget that includes amounts for gifts, meals and parties, travel, decorations and any year-end charitable donations that you make. Before heading out to the stores, create a list of whom you specifically need to shop for or what you need to purchase. Allocate a predetermined dollar amount to be spent on each person or item in order to keep your spending inline.
- Research. Look through holiday advertisements and browse websites for gift and discount ideas. Compare the pros and cons of shopping online versus in-store so that you can stretch your dollar further. In addition, if you typically donate more money to charitable causes at year-end, research a few issues you’re passionate about and commit a set dollar amount to one or two charities instead of “sprinkling” funds around. Or perhaps establish a donor advised fund, which allows for the tax efficiency of a charitable donation and helps eliminate any stress caused by making a “rushed” gift.
- Get Creative. Once you know the “who” and “how much” of your shopping – then the fun begins! Allow yourself to be creative with gift giving. Look into using credit card points for gifts or working on some DIY crafts. Remember that it truly is the thought behind a gift that counts. Figuring out someone’s favorite type of baked good and then whipping up a batch of cookies could be a meaningful and cost effective route. Similarly, hosting a gift exchange and limiting the gifts to “board games” or “favorite bottles of wine” can help to cut costs and create a fun theme for an event.
Ultimately, the holidays are a time to spend with loved ones, celebrating all we have to be thankful for. Remember that planning, organization, creativity and flexibility are four key ingredients for conquering holiday expenses.
Mary Beth Storjohann, CFP®, CDFA
Senior Financial Planner
San Diego, CA