Christmas Budgeting

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Santa flew into town today. The children waved and cheered. It’s that time again where we all start thinking about holiday parties and gift giving. The winter holidays should be about fun and happiness rather than thinking about the dreaded things like our finances. That’s why it’s important to start planning your holiday budget early and not get caught in a post holiday hangover that many individuals suffer from. Many of us feel the financial pressure during the holidays from the growing list of parties start that crop up and the duty to find that right gift for that special someone. This is why it’s so important to start budgeting one or two months in advance in order to meet all your financial obligations.

Relying On Credit

One of the biggest mistakes that many of us make is relying on our credit cards to make purchases for the holiday season. This can lead to excessive and overspending for many people which ultimately results in a big financial shock for January and February when the credit card statements arrive. A lot of individuals view their credit card as being an asset and spend until their limit is up. “Buy now and regret later”. Regret indeed.

Using a credit card to make purchases that you could otherwise not pay for with cash is a terrible practice and should be avoided at all costs. Any outstanding balances on credit cards incur harsh interest rates that are downright robbery. Racking up credit card debt during the holidays makes our financial status in the New Year start off on a sour note. Make this a New Year’s resolution now. “I will not incur a credit card balance that I cannot pay off in January”.

Creating A Budget

pen_and_paperCreating a budget and sticking to it is probably the hardest thing for individuals when it comes to personal finance. Many people don’t know where to start when it comes to budgeting their month to month expenses. It’s important to identify the amount of money left over for discretionary items such as gifts and parties first. The simplest route to budgeting is to first determine your necessary expenses. For example:

  1. Rent/Mortgage
  2. Food
  3. Utilities (Hydro, Gas, Water)

I’m sure most people can’t argue that the essentials in life are generally covered in those first 3 things. These are expenses that are pretty much fixed difficult to eliminate without some sort of extreme sacrifice to your quality of life. Let’s look at the next set of things to consider:

  1. Taxes (Property, Income where applicable)
  2. Insurance
  3. Loan Payments
  4. Media (Phone, Cable, Internet)

These types of payments will vary from individual to individual, but these financial obligations need to be met nonetheless. One thing to note is that existing debt should be paid off before any more discretionary spending. Debt is a financial drag, and should be eliminated if possible. Delaying payments on existing loans means that penalties will add up over time and create an even heavier burden on your monthly budgets. Some will argue that media and entertainment could be considered to a luxury, but for many individuals, their cell phone and Internet are indispensable. Heck you wouldn’t be reading this blog without them!

What you have left over after all those expenses is probably close the maximum of what you can budget for discretionary spending on any given month. I say maximum because one should really be paying themselves first and saving before spending their money. Also, the numbers don’t have to be exact, but doing this exercise will give a good approximation of how much money there is available for your holiday spending.

Setting A Limit

Buying gifts during the Christmas season can get overwhelming. It’s even harder when expectations are set so high that the gifts become overly expensive. Despite these pressures, the budget that you’ve created should be adhered to. It’s very easy to overindulge, but if you create a budget prior to going out and buying gifts, then it makes it much easier to meet all your commitments. It’s also easier to say no to something when you know it’s well above your spending limit.smIMG_3323

Using what you’ve learned about your discretionary spending money, create a list of people you want to buy gifts for and allocate an amount to each. Set that as your maximum limit no matter how “perfect” of a gift you find while shopping. There are always alternative gifts that will fit for the person you are buying for without blowing the wallet. Don’t make excuses such as “this time only” because that’s how we all fall into the trap of overspending.

Remember that it’s not just the gifts that need a budget, but also the numerous parties that can be happen between now and the end of the year. These are expenses should also be included in the budget that you create for the holiday season.

Starting Early

With so many financial obligations during the holiday period, we can definitely feel overwhelmed financially. Plus we don’t want to miss out on all the fun that happens. It’s still necessary to live life to the fullest, right? This is why it’s necessary to start saving for the holiday season early. Save some of your discretionary spending money from November or even from October to be used for the December holiday period. This isn’t to say that you shouldn’t be having any fun at all at the expense of Christmas planning, but remember that there are always trade-offs and sacrifices that one has to make in order to be financial responsible.

The Gift That Can’t Be Duplicated

Sometimes the best gift is something that isn’t material. I don’t want to sound too philosophical, but just spending time with friends and family can be more rewarding than a casual gift. Anyone can go out and buy that shirt, cell phone or tablet that the individual craves, but time spent together and the experience generated can never be duplicated. Sure we all want to recreate that magical week in the Caribbean or that crazy weekend in Vegas, but that rarely happens. Sometimes the best gift consists of a bottle wine, some good steak (or veggies) and a dinner date to get together with those you love and care about to share in some food and laughter.

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One shouldn’t have to stress over money matters during the holiday period. This is why a developing a budget and sticking to it is important. It makes decisions a lot easier especially when the holiday season gets busy. Just remember that you have to be true to yourself and respect the budget that you create, but most importantly remember to have fun. It’s the holidays!

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