As the end of the year draws near, we all start to feel a bit more loving and generous. It’s just so much fun to buy gifts for others and to share their happiness. But it’s easy to go overboard with that generosity and have regrets come January when the credit card bills arrive. How can you keep spending under control without feeling like you’re being a bit of a Scrooge?
Avoid the Holiday Credit Card Hangover
If you’re prone to the “I’ll just charge it!” mindset, here’s a little reality check for you:
Rather than racking up a bunch of credit card debt, here are some ideas to rein in that holiday budget that will still allow you to enjoy the giving season.
Make a Budget
Yes, you really, really need one. And not just for gifts: There will be parties to attend, donations to make, travel expenses, and holiday activities and excursions that all need to be budgeted out. They all add up and can be major wallet busters if you haven't planned for them in advance. Be sure to give yourself a cushion of extra funds for unexpected expenses and surprises. You won’t want to miss a spur-of-the-moment trip to the trendy holiday-themed pop-up bar in your neighborhood because you’ve assigned your cash down to the last penny and your budget has no give.
Track Your Spending
Of course, having a budget is no good if you’re not tracking where your money goes. If you prefer the help of technology, use an app that you update daily, or maybe just keep a running list of expenses in a check register. Those are both great methods — when they work. If you’re a little less organized with your cash flow, try sticking to actual cash: Take the money you’re allocating for the holidays out of the bank, and divide it up into labeled envelopes so you know how much you’ve spent and what you have left. For example, you could have envelopes for each person on your gift list, an envelope for new decorations, one for dining out, and one for the holiday meal.
Contain Your Gift Giving
This can be so hard, especially for people who just love giving presents, but very few of us can afford to go crazy and give generously to everyone at holiday time. There are several different methods that can help you control your gift spending; some require buy-in from your entire family and friends, but ultimately, you need to do what’s best for your own financial health.
Gifts for kids only. Limiting your gift giving to family members under 21 (or even 18) can make a significant difference in your holiday budget.
Secret Santa. This isn’t just for the office; in a very big family, picking a name and buying a gift they’ll really love can be a satisfying way to fulfill your generous nature.
Group gifts. Get together with your siblings to pitch in for a nice gift for your parents and keep your budget manageable.
Gift cards. Some people feel these are a cop-out, or are embarrassed that their budget is so obvious when they give gift cards. Don’t be like those people. Gift cards allow the recipient to make sure they get something they really want. And for gift givers who have trouble tracking their spending, they make budgeting and buying gifts super easy.
Stick to Your List
We all have that one person who is so easy to buy for that when it comes time to sit down and wrap presents, that person has five or six items! Resist the temptation by keeping a gift list and crossing off names when you’ve finished shopping for that person. If you find a gift later that you think would be a better fit, be sure you return the first gift!
When You Must Use Credit Cards …
Use a rewards card to make your holiday purchases. The extra spending during the holidays will also help you build up rewards more quickly. If you’ve been using your rewards card throughout the year, you may already have points you can cash in. Using your points for gift cards can help keep your holiday budget in check. This is especially good for business gifts to clients and partners.
You don’t have to sacrifice fun and generosity to keep your finances in the black over the gift-giving season. If you set up your guidelines in advance and are strict with yourself about sticking to them, you’ll have a merry holiday, and start your new year off right!
Sources:
[1] Magnify Money, December 2017.
[2] Federal Reserve, Consumer Credit Outstanding (Levels), September 2018.