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Plan Well, Retire Well

Saving and investing your money

Top Five Tips and Strategies to Save Your Sanity and Budget This Holiday Season

Top Five Tips and Strategies to Save Your Sanity and Budget This Holiday Season

Whether you celebrate Christmas, Kwanzaa or Hanukkah, the end of the year is a budget buster, and the financial hangover can last for months. The problem is no one wants to be seen as a Scrooge or a Grinch.

One key is not just to buy less but shop smarter. Retailers are masters at running promotions to entice you to spend more than you really want. You should make sure that the gift is really what the recipient wants and at a price you can afford. If the gift wanted is not in your budget, then how about buying an accessory to go with it at a lesser cost or find others to go in on that expensive gift with you?

Speaking of budgets, having one that is all-inclusive of the holiday spending is necessary. Not having a budget gives the illusion of no limits. That can get expensive.

So, how much should you spend on the holidays? There is not any hard research to suggest what people should spend. Some of the most common advice is that holiday spending should not exceed 1.5% of the family's income. According to the most recent Gallup poll of expected spending for the 2014 holiday season, people are planning to spend about $781. This would be about 1.5% of a $50,000 annual income. No matter what you plan on spending, the key is not to outspend your discretionary spending for the season.

Here are the top five strategies for having a fiscally sound holiday season.

  1. Make a list. Make sure that all the items you will be spending money on this holiday season are on that list. Include gifts (Immediate family, extended family, colleagues, close friends, gift exchanges and parties, and charity gifts), decorations, movies, music, meals, events (concerts, plays, recitals etc.) parties, holiday cards, postage, baking and travel. On your gift list, put a suggested gift or two next to each name. It helps prevent impulse buying and the purchasing of several small gifts-both of which are expensive shopping methods.
  2. Set a budget. First, decide the total amount you want to spend for the holiday season and then set spending limits in each category. Be prepared for the "worst case scenario" meaning the most expensive items in a category. Then make a game out of not spending the entire amount!
  3. Do the research online before you buy the first gift. Spend a little time each day going to various websites to check out the items you are buying and where the best prices are. Also, check out consumer reviews and quality reporting agencies like Consumer Reports. Setting up a spreadsheet of expenses and research results will be a budget saver when retailers start enticing you with gift ideas and the season's lowest prices.
  4. Start shopping early and avoid trying to buy all at once. Always get gift receipts! Having your research done early allows you to watch for the best price. Spreading out your purchases over the season helps you manage your money for all your holiday activities. Include Black Friday and Cyber Monday shopping (If that is your thing) when internet deals are abundant. Industry analysts are predicting that Cyber Monday deals will last all week. Do not forget to watch for free shipping on internet sites with promised delivery by Christmas.
  5. Finally, Review your actual spending versus what you budgeted. Did you come in under budget? Good for you! Spend more than you planned? If you were close to budget then you did all right. It is time to plan for next year. Divide what you spent this year by 12 and that is how much you need to save every month for the next year to be able to pay for the holidays. With that money already put away, your stress will be lessened and the after holiday hangover of bills will be gone.

Several other strategies can help you have a budget friendly holiday season.

  1. 1. Pay in cash. This is probably the best way to stay within budget. When the cash is gone- you have to stop spending. With credit and debit cards you can spend more than your budget up to your limit or more. Studies indicate when using plastic rather than cash, consumers spend 17% (debit cards) to 30% (credit cards) more than they planned on. The temptation is just too great.
  2. 2. DIY/Re-gift/give of your professional services. These are all acceptable to limit the amount of cash you spend, but there are some guidelines. If you are making items yourself for gifting, make sure you are good at what you do. Instead of trying to make different things for everyone, pick one item (like making jelly) and do that for everyone. Do not forget that DIY gifts are not free- there is some expense in materials as well as your time. Sometimes DIY gifts can cost more than store bought but usually are more meaningful. If you were given an item that you do not like or will not use, it is acceptable to re-gift as long as it is completely outside the circle of people you received the gift from. For example, you would not re-gift an item from your mother to an aunt but you might to a coworker. If you have a desirable profession, consider giving the gift of your time. Be sure to be specific about the terms (1 week of day care services, 2 hours of plumbing services minus supplies/parts). Also, consider experiences as gifts- a trip to the zoo, an afternoon of baking bread, as an alternative to material gifts.
  3. 3. Learn to haggle or ask if there are discounts or coupons available. This can be especially helpful at smaller retailers where you shop on a regular basis. Be realistic in the price you want. After all, the merchant needs to make money also. My husband tried this at a furniture store where the pieces we wanted were already on sale. We not only got the price we wanted, we also got matching tables free!
  4. 4. Shop the after Christmas sales. Items that will still be good next year include decorations, wrapping paper and cards all at 50-75% or more off the regular price. That starts you off on the right foot for next year.
  5. 5. Finally cut back if you overspent or if you put items on credit cards. Brown bagging your lunch for a few weeks or cutting down on outside entertainment until the cards are paid off will help keep the holidays from costing even more with monthly interest payments.

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