How much can you realistically afford to spend on holiday
gifts without going into debt at the start of the New Year?
Keep in mind that your debt may linger long after the gifts
have been given, and that holiday gifting should be meaningful
rather than extravagant.
Utilize the rewarding process of budgeting to take control
of your financial life this holiday season, as well as to
properly align spending to your values and priorities. Refer to
the complimentary FPA resource, " Budgeting: Managing Your
Money with a Spending Plan ," for formats and insights on
creating a viable budget.
Apply and practice the following strategies to inhibit
overspending and to develop robust saving habits:
- Devise a total budget, a plan to figure out the maximum
amount you wish to spend this holiday season. To anchor your
shopping experience, you should concurrently compile a
complete list of all those you expect to purchase gifts for
and set expenditure limits for each person on your list.
Ensure you allow a cushion for unexpected items or price
fluctuations. Most importantly, avoid the social comparison
inherent in holiday shopping.
- As a substantial percentage of credit card debt is
incurred around the holidays, you can prudently commit to
carry cash only and leave credit cards at home to avert
impulse spending. Be wary that those holiday items which
appeared to be bargains can end up costing more than you
thought, due to interest on outstanding credit card balances
months later. Alternatively, you may buy gift cards, which
enable you to spend exactly what you budgeted.
- What are some fulfilling and cost-effective holiday
gifting ideas that hold special significance to you and can
be enjoyed by others? Consider making a positive impact by
volunteering your talents to assist local charities and
organizations in need of your services (i.e. Susan G. Komen
Breast Cancer, Habitat for Humanity). Donate old or new
belongings, such as eyeglasses and house furniture, to
generously help the underserved (i.e. Lighthouse for the
Blind, The Salvation Army). Further, you and your close ones
can connect in a meaningful way this holiday season by
organizing a party for the benefit of a shared cause or your
community.
- Gift making can also be a gratifying and engaging way to
save this holiday season. Give your family members a personal
and memorable experience, such as a weekend retreat at a
vacation destination. Get together with your loved ones to
collaborate on making a family photograph album or cookbook.
In addition, you can request your relatives to contribute to
a joint gift, like a college fund. Pledge your future time or
efforts (i.e. babysitting, tutoring) via written certificate
and hold your recipient to redeeming these services.
- While you are in the holiday budgeting mode, it is never
too early to start saving now for what you desire to spend
next year and plan beyond. Orient yourself with the
methodology in YouNeedABudget.com to effectively take your
cash, checking, and saving accounts (less any credit cards
that you pay off in full) and assign specific purposed to
that money. Compartmentalize fixed amounts each month for
large known and unexpected expenses, such as insurance
premiums, anniversaries, future holidays, and home repairs.
Without spending income from your current month's paychecks,
you can facilitate a transition to this approach and automate
monthly bill expenditures by living on last month's
paychecks. It is essential to openly communicate, negotiate,
and agree on allocated monetary needs and wants during a
monthly family budget meeting.
Enlist the guidance of a qualified CERTIFIED FINANCIAL
PLANNER
TM
professional from the Financial Planning Association
®
to analyze your cash flow and to prompt changes that will help
you achieve holiday spending goals. Run retirement estimates
and forecast the cost of your child's college education before
shopping.
Ultimately, you can resist the temptation to splurge and
successfully manage your finances by sticking to your current
budget and long-term plan.
FPA member Elaine King , CFP
®
, CDFATM, is Chairman of FPA of Miami-Dade and Author of Family
& Money Matters, La Familia y El Dinero Hecho Facil. FPA
member Philip Herzberg, CFP
®
, AEP
®
, MSF, is President-Elect of FPA of Miami-Dade and Director of
Media Relations & Public Awareness for FPA of Florida. They
serve on the Estate Planning Council of Greater Miami Board of
Directors
.