Between family obligations, office parties, gift exchanges and the overload of retail discounts, it doesn’t take long for well-meaning holiday spending to spiral out of control.
Whether you’ve avoided setting aside a holiday budget at all or you simply find all those sales hard to ignore, there are plenty of obstacles to leave you wondering where your savings went come January.
Stay ahead of the curve and avoid these common spending mistakes so you won’t start the new year with a heap of debt.
Mistake No. 1: Overspending on the extras
Even the most savvy shoppers can fall victim to incidental costs, like $6 rolls of gift wrap, $4 greeting cards and $10 battery packs.
And holiday travel and hosting means risking even more of these costly incidentals. Your car goes through more wear and tear during travel between states and your monthly utilities can increase when guests stay over.
Before you know it, you may rack up hundreds of dollars worth of charges ranging from gift accessories to oil changes.
Solution: Account for everything
Don’t let these costs, big or small, cause you to overextend your wallet.
Even if some are unavoidable, you can cushion their impact. Shop smarter at bulk stores like Costco or BJ’s Wholesale Club and don’t be afraid to use coupons. It also helps to build incidentals into your holiday budget from the beginning. Remember that it’s okay to dip into your already-dedicated emergency savings for any larger costs like car repairs that your regular budget doesn’t cover.
“That’s why you have your savings and why you should always have some savings available,” says Danna Jacobs, founding partner at Legacy Care Wealth in Jersey City, New Jersey. “When you do have expenses come up, whether it be additional holiday giving or a car breaks down, you can pull from that for the extra funds to make sure you can make ends meet.”
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Mistake No. 2: Procrastinating
You don’t have to check off every item on your list over Black Friday weekend, but putting off your shopping until just before the holidays is an easy way to fall into a spending trap.
Retailers may raise prices or your options can simply become limited from waiting to purchasing gifts too late into this year’s already-shortened shopping season, especially if they’re popular or hard-to-find.
The same is true for booking holiday travel, as well.
According to travel website SkyScanner, the best time to book your domestic holiday flights was over the weeks between Oct. 8 and Nov. 19 and, based on historical data, prices will only continue to rise as Christmas draws near.
Solution: Do your research
If you’re in the market for items like clothing, shoes, toys and certain electronics, you may find great deals on Super Saturday (the Saturday before Christmas), but these prices can vary. Start scoping out prices early so you’re prepared when you spot a deal.
When it comes to travel, the earlier you book, the better, at least this close to the busiest days of the season. Because the holidays are a peak travel time, you may not be able to convert your airline miles for the best rate, but if you’re not so concerned about getting the best deal, using miles you’ve already accumulated is one way to spare cash this season.
Remember to take advantage of all your available resources, too. Check your credit card account to see if your issuer is offering any limited cash back offers, scan cash back savings sites like Rakuten and make sure you’re using the cards that will help you earn the best rewards on your shopping and travel.
Mistake No. 3: Going into the season without a plan
Perennial holiday overspenders will be familiar with the feeling of dread that accompanies January’s credit card statement.
Each day you put off developing your holiday spending plan, it can become even easier to justify those extra credit card charges and not think about making the actual payments when you’re down to the gift-shopping wire.
Solution: Spread your planning throughout the year
Jacobs recommends budgeting throughout the year so you don’t have to scramble come holiday season.
Starting January, put away a small amount each month, “then when that bill comes next year, you have the funds to pay all of your holiday spending without having to go out of pocket,” she says.
Consumers are expected to spend over $1,000 during the 2019 holiday season, according to the National Retail Federation. If you divert just $100 each month into a savings account, you’ll be able to cover those costs and save yourself from taking on debt for any extras.
There are other planning methods as well. Save your credit cards’ cash back rewards throughout the year in anticipation of the holidays, make sure you’re using the card with the best rewards structure for your shopping and supplement your spending with any unused gift cards you have at home.
Once you’ve finalized your gift list, spend a few minutes comparing prices at different stores, online and your credit card issuer’s online shopping portal to ensure you’re getting the best deal. Over the course of the season, those savings will quickly add up.
Mistake No. 4: Putting financial priorities on the backburner
According to a Nov. 2019 Bankrate survey on holiday spending, while most shoppers are planning to use money they already have for holiday purchases, 18 percent plan to use at least some credit for holiday spending. What’s more, 61 percent of those with credit card debt are willing to add to their balances this holiday season, according to a Nov. 2019 CreditCards.com survey.
If you let yourself get too caught up in the seasonal spirit, you can lose sight of the long-term financial goals that you’ve prioritized over the past year. Don’t allow holiday shopping slow down your debt payoff or put you behind on your monthly goals.
Solution: Don’t lose sight of your goals
Make sure you cover your regular monthly expenses and savings obligations before you start swiping your credit card.
“You have to find a balance,” Jacobs says. “Be realistic about what your real budget is. Work with budget tools, and then set a reminder on your phone to make sure you’re checking in with them. By doing that, you can position yourself very well so that you have that level of awareness and it will start driving your decisions.”
Mistake No. 5: Giving into spending pressures
It can be easy to give in to the pressures of holiday parties, gift exchanges and travel opportunities. In fact, more than 51 percent of Americans feel pressured to spend more money on holiday gifts this year than they’re comfortable with, according to data from the Bankrate survey.
“A lot of times, people that are the most generous with others are those who present as if they have more financial means than they actually do in their household,” Jacobs says. “That’s an ongoing pattern, overspending on others.”
Solution: Get creative
You don’t have to give extravagant gifts to prove that you care.
“Try not to fall into a behavioral pattern of trying to compensate with spending money on things, because time and love are more valuable than anything you can buy,” Jacobs says.
Handmade gifts and homemade foods are always an option. You can also suggest a group gift swap rather than exchanging gifts with everyone.
“Often, people are more open and conducive to a gift swap arrangement,” Jacobs says. “It can be better and more meaningful as a recipient to get one meaningful gift than a lot of little ones.”
To avoid regret come January, keep your perspective this season. Put your bigger goals and budget in focus, and be honest with your loved ones about your spending limits.
“The holiday season is so much fun, but it can be so stressful,” Jacobs says. “If we get too much out of our normal habits and go crazy, we just end up unhappy and frustrated in the end. It’s all about balance.”
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