November 30, 2007

Staying Off the Naughty (Spending) List:

Ten Ways to Manage Your Finances and Avoid Post-Holiday Regrets

The holidays are upon us, bringing all those images and sensations we cherish—the glow of the menorah, the fragrance of home-cooked meals and sugar cookies, and the sounds of the season in holiday songs, laughter, and shrieks of joy from kids discovering Santa’s generosity. But for many of us there are a few not-so-joyous holiday sights (a purse overflowing with credit card receipts) and sounds (the ca-ching! of the cash registers marking our escalating debt). These negatives can easily outweigh all that we love about the holiday season, especially when we consider the financial consequences we’ll still be suffering long after the last gift is opened.

“Americans already spend more than they can afford,” says Tyson, author of the new book Let’s Get Real About Money! Profit from the Habits of the Best Personal Finance Managers. “Our national personal savings rate is negative 1 percent. Many people already owe money going into the holiday season so the annual shopping spree just adds insult to injury.”

But despite the fact that many of our coffers aren’t exactly bubbling over, a recent Gallup Poll shows that few of us are planning to temper our holiday spending. The poll shows that on average Americans expect to spend around $909 on holiday gifts this year. Whether it’s a dedication to the gift-giving tradition, a sense of obligation, or a feeling that the holidays entitle us to have a little more fun than usual, too many of us seem to turn a blind eye to the bank-busting reality of all that spending.

Guess what? You don’t have to join in the spending frenzy. What if you could have a wonderful, memorable holiday and avoid the financial hangover afterwards? Tyson provides great tips on how to keep your holiday spending in check.

Find an alternative to gift-giving during the holidays. Many people feel they have to give gifts during the holidays, either because it’s a family tradition or because they know their friends and relatives have gotten gifts for them. There are plenty of great ways to trade in this tradition for another one that is even more meaningful, and chances are your family and friends will be happy to save gift-buying dough as well.

If you must buy gifts, cut your expenses elsewhere. Perhaps you’d rather dine out or go to the movies less, or maybe you can forego that new pair of shoes you’ve been wanting for yourself in order to afford gifts for the grandparents. “It doesn’t matter where you make cuts, just that you make them,” says Tyson.

Set a budget and keep tabs on what you are spending. While you’re doing your holiday shopping, your new best friends should be your checkbook register, credit card statements, and all of your receipts. It’s easy to get into a spending rhythm when shopping for yourself or others, and that’s why you need to physically write down every purchase you make and make sure you don’t go over your budget. And don’t forget about all those ‘necessary’ holiday extras. Most people don’t budget their shopping and don’t realize that by the time you buy all the presents, plus wrapping paper, cards, decorations, etc., it’s added up to a ridiculous amount. Having a budget that you know you must stick to will help keep your impulse spending from getting out of hand and will help you hone in on the most reasonably priced holiday items.

Plan what you are going to buy, and don’t get any extras! Particularly during the holidays companies pull out their most appealing of packaging in the hopes of snagging the eyes of shoppers. That’s why along with your budget, you’re going to want to take an exact list of what you want to buy for your gift recipients. Don’t go shopping for someone’s gift until you know exactly what you are going to buy.

Use the season to set a good example for your kids. Your kids learn about money from you. And if they see you spending left and right during the holiday season, the lesson they come away with isn’t going to be a good one. During the holidays it’s very easy for the “gimmee gimmee gimmee” materialistic attitude to get out of control. After all, kids are bombarded with constant advertisements for toys, clothes, and the latest gadgets you can be guaranteed they’ll want (or at least think they do!).

Leave the plastic at home. Many of us can explain away spending so much on gifts because we simply charge everything and reason that we can pay it off gradually after the holidays. This is a great way to create a never-ending cycle of consumer debt for yourself. It only creates unnecessary financial stress for you after the holidays.

Invest in your kids’ financial futures. It may not seem as exciting to your kids as a new iPod, but a contribution to their financial well-being will be appreciated long after such expensive “toys” are obsolete.

Remember that meaningful gifts don’t necessarily have a big price tag. “Sure, it might be nice to give your mom a brand new TV, but there are other things out there that will be even more meaningful and enjoyable for her—like a photo album with candid shots of the grandkids or something they’ve made for her themselves,” says Tyson.

“Money can easily become the focus of the holidays when it should be the last thing you are thinking about,” says Tyson. “By keeping your spending under control, you can have a great holiday and avoid the sick feeling in the pit of your stomach that occurs when you start getting those credit card bills in the mail. If you prepare properly, you can achieve a happy balance of spending and saving during the holiday season. That’s a great gift in and of itself, for both you and the people you love.”

Eric Tyson, MBA, is one of the nation’s best-selling personal finance book authors and has penned five national bestsellers (he is also the only author to have four of his books simultaneously on BusinessWeek’s business book bestseller list).

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