Since Thanksgiving, my inbox has been bombarded with politicians to support, suggestions for gifts to give and ways to contribute. It started on Black Friday, which was followed by Small Business Saturday, then Cyber Monday, and finally, Giving Tuesday. It’s no wonder December is the most difficult month to stick to a personal budget.
Spending more than your budget allows any time of year can destroy your finances for months to come. But the holiday season can be even scarier if we approach the gift giving season with no budget at all. According to a November 16th Gallup Poll, Americans plan to spend an average of $830 during the holiday season. That figure is sharply up from last year’s $720 average. Here’s the scary version: You plan to spend $830, but end up spending $1,000 and you don’t have the extra $1,000 in cash or savings so a credit card is used. If you make a monthly credit card payment of $50 to pay off the $1,000 charge, your credit card charge won’t be paid off for 22 months – almost two years later!
Here’s the budget version: In January, yes January. You look at your budget for the year and, based on what you spent last year, you plan on spending around $830 for presents during the holidays. You divide $830 by 12 and come up with $69.16. But you know you tend to become generous during the holiday season so bump the number to $75. You have now created a budget item called “Holiday Presents.” Every month, you put away $75 and when it is time to shop for holiday gifts, you’ll have $900 to spend WITHOUT USING A CREDIT CARD.
I’m not trying to scare anyone from getting into the holiday spirit, or providing a gift for those you care for, or generously donating to a favorite cause. The idea is to budget and spend accordingly. It’s easy to stick to a budget in March or July when there is less pressure to spend above the normal bills and ancillary activities. However, budgets become increasingly difficult to stick to when irregular items enter the spending picture.
How do you stick to a budget during the holiday season?
- Have a budget, not only personally where you controlled spending and saved money throughout the year, but one specifically for the holiday season.
- Plan. Plan your expenditures. Mom’s present ($100), brothers and sisters ($50 x 3 = ($150), charity ($50),and so forth. With a plan ion hand, you’re less likely to overspend when you walking around the mall “just looking.” Plan early, and plan often.
- Be flexible. Budgets are living documents and your plans will change. Like your financial plan, budgets consistently change because of both good and bad circumstances. What you planned for in January may not necessarily still be true in October.
- Be diligent. Do your research. Determine the average cost and availability of the items you plan to purchase and you’ll save money, time and effort.
- Be disciplined. It’s easy to get caught up in gift giving. Why not? It feels good to give. However, do not overspend and destroy your future finances. It also feels good to be disciplined.
Building and sticking to a budget is an ongoing process. The main point is to start and be disciplined. The holiday season is a time for reflection, family, and friends. Do not tether your personal finances to the whim of purchases that were un-budgeted and suffer the consequences throughout the next year. It’s not too late to make a plan for this year and to look forward to next year. Know your limits, know your finances, be disciplined in your planning and spending, and have a wonderful holiday season.
Captain, USMC (Ret.)
Disclaimer: (have to do it) – This blog should not be considered financial, investment, legal or tax advice. Consult your licensed financial professional, tax advisor or legal counsel. This blog is for educational purposes only.