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Holiday Budgeting

Holiday Budgeting

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Holiday shopping can be dangerous, especially with credit card debt. Believe it or not, it is possible to come out of the season on top -- or at least not in the red. Follow some of these helpful guidelines:

1. Set Your Budget
The best way to start making a holiday budget is to look at your spending during last year's holiday season. In what areas did you spend more than planned? Next, make a list of the holiday purchases and events you plan to spend money on this year. Consider all of your major spending categories like gifts, entertaining, meals, and travel and then estimate how much you can afford to spend in each category. Have a "micro budget" – a specific spending limit – for each person on your gift list. Many financial planners recommend spending no more than 1.5 percent of annual income on holiday expenses.

2. Buy ahead of time
You have all year to buy gifts. Not only will buying gifts ahead of time help you avoid the jam-packed malls, you'll also save quite a bit of money since you can shop during sales earlier in the year. An all-out shopping spree leaves you exhausted from shopping, tempting you to buy the next thing you see regardless of cost.
So, it's August and you see a scarf on sale -- buy it and put it away and give it to your sister at Christmas."

3. Make a list
Writing down who you need to buy gifts for and what you've already bought them will also help you avoid overspending. Make a list of gift recipients and decide how much you want to spend on each person. If you're unable to spend as much on gifts this year, prioritize for whom you really want to buy gifts. Then communicate your plans to family and friends. If you tell them you won't be exchanging gifts this year, then you won't feel embarrassed if they purchase you a gift.

4. Get creative

Impress your friends and family by making their gifts, rather than buying them at the store. There are plenty of websites where you can find craft ideas and projects.

5. Track your spending

You've made a spending plan -- great! But if you don't keep track of all your purchases and make sure you're staying within your budget, you've wasted your time. Write down everything you spend on holiday clothing, cards, postage, wrapping paper and decorations, reminds Dvorkin. "Don't forget that these holiday expenses add up and need to be tracked on your budget."

6. Regift when possible

If you got a gift that you will never use, then don’t be afraid to regift it. It is not tacky, provided it suits the person you are giving it to and you are not just fulfilling a gift requirement.

7. Beware of hidden costs
Don’t forget in your budget that it’s not just presents. Holiday decorating, hosting, travelling, mailing, and cooking can all impact your budget. Stamps cost a lot of money depending on the size of the parcel.

8. Entertain for less

Hosting a party can be costly. Don’t let it hurt your pocket book by making it pot luck, or keep it to just appetizers. People care more about the quality of the visit than the food that is served.

9. Be an educated consumer

Comparison-shopping stretches your holiday funds further. Fight the urge to get your shopping over quickly. Instead, take some extra time to find the best deal before heading off to the stores by scouring catalogs, sales advertisements and the Internet.

10. Load up your wallet with cash

Leave your credit cards at home. Spend cash. This will force you to budget and make overspending more obvious. There is no emotional attachment to plastic like there is to cash.

11. Use credit judiciously

Shop with no more than two credit cards -- preferably low interest-rate credit cards, not the expensive department store cards. The more cards you use, the harder it is to track spending. Use one with a zero balance for purchases you will pay off in full. Use the other, low-interest rate credit card for purchases you plan to pay off over the next few months, suggests Myvesta.org.

12. Beware of sales pitches

There is so much holiday hype. Try to avoid deals that offer deferred payment plans or low interest. Also avoid applying for department sore credit cards to get that one time discount.

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