Every year, thousands of Americans find themselves in financial trouble after the holidays, because Santa and his elves spent a little too much. But, planning ahead can help keep Santa out of debt.
With the holidays approaching and the economy still sluggish, it's more important than ever for families to budget their money, monitor holiday spending and avoid getting in too deep with credit card debt.
Start the holiday shopping season by making a list of all the things you are likely to spend money on.
This will certainly include Christmas gifts, but also think about holiday extras such as gift wrap, decorations, cards, postage, extra groceries, eating out, special clothing, extra child care, gas and other holiday travel expenses.
Don't forget to add in regular expenses that also occur this time of year, such as property taxes, charitable contributions, winter car maintenance, car tags, insurance and other year-end costs. Think about the likely cost of all the items on your list and compare to the amount of money you have to spend. The key is to create a budget — a spending plan that will help you cover regular and extra expenses — and stick to it.
With the holiday financial crunch, more consumers may be tempted to turn to credit cards. But excess debt can certainly dampen the holiday spirit when the bills start arriving.
The first step to avoiding excessive credit card debt is to pledge not to charge anything that will be gone before it's paid off, such as eating out or gas. Another step is to use only one credit card for holiday shopping and keep a spending log and all receipts. It's easy to get caught up in the moment and lose track of how much has been spent if numerous cards are used.
Another way to avoid overspending is to have a specific amount of holiday cash in hand and not to withdraw more when it's gone.
Gifts are one of the largest categories in the holiday budget. But if you start ahead of time by telling people you are trying to control spending this year, they will be more forgiving for receiving a less expensive gift from you. Drawing names among family members, co-workers or groups of friends can cut down on the number of gifts to buy, too.
Instead of spending a bundle buying gifts, think about homemade gifts that give of your time, such as a typed set of favorite family recipes, a scrapbook of memories, or coupons for chores or services you can do for the recipient after the holidays. Another creative idea is to do something together, such as taking the family to the theater or out for a special meal instead of buying separate gifts.
Gifts that can be enjoyed by the whole family can also cut down on the number of individual presents. For example, buying a game system or DVD player for a family with several children might be a cost savings over buying smaller gifts for everyone.
Finally, to put holiday spending in perspective, focus on the real reason for the Christmas season and look for non-material ways to celebrate. This will help to make the holidays more meaningful for everyone.