Gary's Soapbox:
Hopefully, I'm not too late...
Managing Holiday Shopping
Many people begin the New Year in a financial hole. The reason? Credit card bills coming in from Christmas. What you do over the next few weeks can make or break next year's budget.
The first step in keeping your financial sanity when it comes to shopping is a budget. Sit down today and look over your finances. After taking into account all of the things you need your savings for (the next car, house repairs, emergencies, a vacation, etc.) decide how much of what is left is reasonable to spend for holiday gifts.
Note that this is different than what is normal. People normally make a list of everybody they want to buy a gift for, decide what they want to buy them, purchase those last minute items they forgot about, and then look around to see where the money will come from.
Normal is bad. Be abnormal. Decide what you can afford to spend first.
Once your budget is lined out, you can look to see who you need or want to buy gifts for. Divide out the money to determine how much of it you can/should spend on each person, refiguring as necessary. Keep some money back for those surprises, like an office gift exchange you didn't know about or that Aunt who's coming in town unannounced to celebrate with you.
Oh my, I'm guessing that many of you reading this don't have enough money to buy what you want for whom you want. Feel free to take me off your list. But just because you don't have enough money for spreading holiday cheer in the way you want to, it does not mean you now have a good excuse for going into debt for it. Why let a gift cause a debt that keeps on taking?
If you've either underfunded or unfunded your gift savings, there are three choices. First, you can ignore sense and reason (and me) and spend what you want to. This choice does not bode well for your financial security. If you don't understand why spending more than you can afford is a really bad idea, more words from me probably won't help.
Second, you can spend only what your budget allows. It may not be emotionally easy and some recipients of your new frugality may not like it, but it will make you less miserable than opening up credit card bills that you can't pay off.
And last, you can reduce another area of the budget that's not as important to you. If you had some money saved up for a vacation, you can trim that and spend more for the holidays. The new car could be cheaper or put off another year. Just don't trim true needs like your emergency fund or retirement savings just to have bigger boxes under the tree.
I know this doesn't sound all that fun. But part of being a responsible adult is to do the right thing even if it doesn't feel good. Plus this doesn't have to be permanent. Once this season is over, start saving a little each month so that you'll have the money you want to spend next year.
Gary Silverman, CFP
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