Stay Financially Fit This Holiday Season

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Ah, it's the holidays, time to deck the halls, make merry and give to those in need.  If you're feeling the financial squeeze this holiday season, know that you're not alone. Between the gift buying, holiday decorations, cards, shipping costs, and charities we all feel the financial squeeze. Avoid the January credit card shock many people experience by making a plan before you start shopping on black Friday.

Step 1: Figure out how much you have to spend

Take a look at how much you have in your bank accounts and figure out how much you expect to earn.  Outside of your regular budget calculate how much money you can allocate to food, travel, gifts and charitable giving without spending more than you earn or more than you have saved.  This is a decision you and your spouse or partner should be making together. 

One of the tricks I use to meet my holiday spending needs is to save my credit card points for holiday shopping.  I have both a cash rewards card that I use for my business and an amazon prime card for my personal shopping.  If you shop a lot on amazon, the amazon prime card is worth getting.  You earn 5% on all amazon purchases and 2% on groceries and restaurants.  The key to using credit card points is to make sure you are paying off your total balance every month.  If you're maintaining credit card debt, the rewards will never make up for the interest you are paying on the debt.

Step 2:  Create your budget

You and your spouse or partner should agree on where the total budget should be spent.  Breakdown how much you will spend on gifts for each person you plan to give to and allocate the other funds to food, travel, charities, etc. If this your first time putting together a holiday budget, it can come as quite a shock when you see the total amount you plan to spend.  If you find you're struggling to buy all those gifts, or if you wish that some of that money was going towards one of your financial priorities like retirement or a new home, chances are the others in your family are feeling the same way.  To cut costs, consider talking with your family about reducing the amount of gift giving.

Between my husband and I, we could potentially find ourselves buying gifts for over 30 people in our family alone.  Just thinking about that stresses me out.  Where would I find the time to buy all those gifts?  How would I come up with 30 gift ideas that people would actually want?  I'm so grateful that 20 years ago my family stopped buying gifts for everyone.  It was a gradual process.  We started with pulling a name out of the hat and just buying a gift for that person.  After a few years we realized we really just wanted to spend time with each other so we stopped the gift giving for the adults.  We don't buy for all the nieces and nephews either. We split them up among the brothers and sisters so that each one us only buys a gift for 1 or 2 of the kids.  

Step 3:  Track your actual spending

Before I head out to the stores, I like to figure out what I'm purchasing for each person to make sure I stay within budget and make sure I'm getting them the things they really want.  This also helps you save time shopping by knowing what you are going to get.  As an added bonus, if you have young kids it helps you ensure you're getting the same amount of gifts for each child.  There is nothing you can do if the night before the big day you pull out all the gifts and realize Sally has 10 gifts while Ben only has 5.  Yikes!

Once you've started shopping you can track your spending the old-fashioned way by creating a spreadsheet like the one attached or you can use one of the online budgeting tools.  The online tools feed the transactions from all your credit cards and bank accounts into your budget so you can see how much you've spent so far on food, gifts, etc.  This will help you stay on track and give you a good base to plan for next year's budget. 

Step 4: Create a savings plan for next year

Use what you actually spent this year to figure out a budget for next year.  If you found you spent a lot more money in a category than you planned, make sure that it is where you want the money going.  If it isn't come up with a plan for how you will reduce that expense next year.  Set up a direct deposit to a savings account and plan to save a little each month to meet your needs. Having the cash sitting in an account ready for next year's holiday spending will go a long way in reducing your holiday stress.

It's easy to get caught up in the holiday spirit, having a budget can help you stay on track and reduce holiday stress. Make 2018 the year you become financially fit. Call me at 703-677-4587 to find out how.