Having a Plan for Holiday Spending

One of the 7 principles of money that I teach is that if you want to be successful with your money you have to learn to live on less than you make.  Now this doesn't mean that this applies to you only 10 months of the year and during the holidays it's a free for all.  It seems to be the same story every year.  We fail to plan for the expenses associated with the holidays and are surprised every year when Christmas still comes in December.  Then we don't pay for it until the tax return comes.  There really must be something in the air this time of year that causes a disconnect between your brain and your wallet.  Did you know that Americans spent nearly 16 billion dollars on holiday spending in 2009 and that was only in November and the first week of December?  And that was up from the year before.  If you are tired of this yearly cycle, here's what I suggest to break it.


1. Be realistic about how much you can and want to spend.  No matter what your income or situation, you have to set a budget.  This includes budgeting for more than gifts.  Decorations, parties, extra food, increased utility costs from lights and guests, and transportation costs often get forgotten and aren't budgeted for properly.
2.  Spend only actual money, whether in the store or online.  If you don't have the money in cash or in your account, don't buy it!  No matter how much it's on sale or you may want it.  If it's not in the plan, you don't get it.  This will make you prioritize not only how much you spend but what you buy with that money.  Plus, not having a massive credit card bill looming in January will make the season all the more enjoyable.
3.  Do a gift exchange.  Instead of buying gifts for every member of your family or extended family, draw or rotate names year to year.  My own family has been doing this for many years and it's worked very well.  Only having to buy one gift simplifies things immensely.
4.  Be honest with your family and friends.  Tell them this is the year that you are breaking the cycle and aren't spending what you've spent in the past.
5.  Prepare for next year.  Christmas is obviously a non-monthly expense.  As such, you can start in January to accumulate money every month into a Christmas fund.  Divide the amount you are planning on spending by 12 and put that much aside every month.  By the time next Christmas comes you will have the money needed to pay for everything.  This is very simple to do, but takes planning ahead and being intentional.