Normally I do not begin to think about holiday shopping until the beginning of December. This is in despite of the fact that I consistently have more credit card debt after the holidays than I feel comfortable with. With that said, I’ve decided that this year is going to be different. In the attempt to avoid the annoyance of post-holiday credit card debt, I’m going back to the basics of personal financial management and prepare early for the holidays. I wanted to share the following ideas to help holiday-proof your finances.
Create a Holiday Savings Account
If you’ve read any of my other articles, you know that I’m a huge fan of creating purpose specific bank accounts. Creating a separate savings (or checking) account specifically for holiday expenses can make saving money a little easier.
Separating your savings into accounts like “household expenses”, “vacation fund” and “rainy day account” can help reduce the negative psychological effects of spending too much money. These effects include regrets such as post holiday guilt… “Why did I rack up all of that debt?”
Additionally, creating a holiday savings account and funding it over the course of the year will help spread the cost of these one time expenses over a longer period. This will reduce the stress of dealing with large one time expenses and ensure your budget is at least manageable at the end of the year.
Forget the Discounts, Shop Early
Every year local news channels hype up American consumerism by stressing the importance of getting “great deals” when buying holiday gifts. Unfortunately, feeling like you’re getting a great deal and saving money (when you are actually spending it) normally leads to overspending.
When retailers discount the prices of their inventory for the holidays, they don’t have your best interest at heart. These corporations are competing with other stores for your business and are attempting to increase demand for their goods through a reduction in price.
With that said, saving a few percent on a television purchase is not worth the wait or the hassle. Shopping early can help you keep your finances under control by spending a little of each paycheck on holiday purchases. This helps reduce cash flow volatility at the end of the year.
Avoid Materialism, Give Life Experience
We might share the opinion that many Americans have forgotten (or never really knew) the true spirit of the holiday season. As I eluded to earlier, our society has turned the holidays from a time to cherish our families to a time of materialistic pursuits and financial stress.
The holiday season is not competition where we see whom can spend the most money. Affection for one another should not be quantified by monetary value, but for laughter and shared experiences.
If you want to holiday-proof your finances, change the way the holidays are celebrated in your family. Incorporate time for meaningful discussions and celebrate the things that truly matters in life.
This holiday season improve your financial decision making by creating a plan and start early. I encourage you to create a holiday savings account, start funding it now and remember to focus on life experience and not material gifts.