Little steps you can take to keep from getting carried away.
You’ve seen the footage on the news. You’ve been in the middle of it. You’ve stood in the vexing lines. You’ve circled for the elusive parking spots. Holiday shopping can be downright frenzied – and impulsive.
You don’t necessarily need to go to the mall to feel the pressure and the urges – a half-hour with your laptop or tablet can put you in the same frame of mind.
But how do you keep your spending under control, whether in a brick and mortar store or at home? Here are some tips.
Make a plan. Most people do their holiday shopping without one. Set a dollar limit that you can spend per week – and try to spend less than that. As you plan your financial life – and check on your plan every few days – you may feel a little less stressed this holiday season. In fact, you might want to make two budgets – one for shopping, the other for entertaining.
Remember that your kids look to you to build habits when they are adults. If they see you overspending and using credit to buy gifts then they will do the same. If they know you plan your budget and your gift giving responsibly then they will be less likely to carry high interest debt in the spirit of the holidays.
If you aren’t vigilant, the holiday season could leave you with a “debt hangover,” or contribute to a severe debt load you may be burdened with.
Recognize the hidden costs. Holiday shopping isn’t just a matter of price tags. When you don’t visit brick-and-mortar retailers, you don’t eat at the food court or coffee shop and you don’t spend money for gas. Carpooling to the mall or taking public transit can help you save some cash.
On the other hand, when you shop online, there’s always shipping to consider. It can make what is seemingly a bargain less so. Online retailers can be very finicky about returns. Miss a deadline to return something to an online retailer (who hasn’t?) and you may end up paying sizable return fees or just getting stuck with what you purchased.
Counteract those holiday expenses elsewhere in your budget. Maybe you spent a couple hundred more than you anticipated on that flat-screen. To offset that extra spending, pinpoint some areas where you can save elsewhere in your budget. Could you find cheaper auto insurance? Could you eat in more this month? Could you drive less or cancel that gym membership or premium cable subscription?
If you do go overboard, strategize to attack that excess debt. You may want to pay off the smallest debt first, then the next smallest and so forth onto the largest. Or you may want to pay down the debt with the highest interest rate first, then the one with the second highest interest rate, and so on.
With the latter method, you can potentially realize greater savings on interest charges, but you lose the accomplishment of quickly erasing a debt. Both strategies have you making the minimum payment on all debt but selecting debt to which you will devote all your extra cash. The benefit is that as you pay off your first debt, the second debt in line will have a larger payment and be paid off faster. The option you select should be based on whether it is more important to you to get the psychological “high” from paying off a debt or to save money on interest paid on your debt.
If you feel like indulging yourself, indulge sensibly. Some people do give themselves holiday gifts, and the same logic applies – whether it is a meal, a motorcycle, or a spa package, don’t break the bank with it.
Consider how your loved ones would feel about your debt. Family and friends are likely to be perfectly happy with a gift that involves more personal thought than something that has a high price tag. Ask yourself if your family would want you to be burdened with debt throughout the year just so they can get an expensive gift. A new holiday giving strategy can put more emphasis on people than material objects (without suggesting that you are watching your budget).
Lastly, think about setting aside some “gift money” for 2016. If your finances allow, how about putting $100 or $200 aside for next season? Invested in interest-bearing accounts (or elsewhere), that sum could even grow larger. Some people open bank accounts (be aware of potential monthly fees) just for gifts so they can approach gift giving with a ready budget.