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Financial Education for Everyone

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November 27, 2006

Now that the leftover turkey is gone, you’ve probably moved on to the next seasonal event – holiday spending. Between gifts, entertaining and travel, many of us spend considerably more than we’d planned, let alone budgeted for. Add the inevitable 10-pound weight gain and it’s not hard to understand why for many, December is the most stressful month.

Ideally, you’ve been setting money aside all year to pay your holiday expenses. No? Then make that a New Year’s resolution priority for next year. In the meantime, here are some tips for planning a holiday season budget:

First, take a hard look at what you typically spend on gifts, decorations, new outfits, wrapping paper, cards, special meals and year-end gratuities.

At the same time, look at the rest of your budget and estimate how much you can afford to spend without racking up debt. Some financial planners recommend spending no more than 1.5 percent of your annual income on holiday expenses. If you haven’t saved that much, look for ways to cut back. For example:

  • Make gifts – get your kids involved in this family activity.
  • Draw names with family members so you each buy fewer, nicer gifts.
  • Give older relatives gift certificates for chores they can’t easily do. Grandma doesn’t need more bath salts; she needs someone to help shop and do yard work.

Be honest about what nonessentials you could cut out this year. Think about some of the unnecessary gifts you received last year: would you have been any less happy without them? You might just save someone a trip to the return window.

Make a list – check it twice. Decide what you want to spend on each item and stick to your guns. It helps to know in advance what you want to buy so you’re not enticed by all the attractive merchandise on the shelves.

Monitor your spending. Practical Money Skills for Life, a free personal financial management site sponsored by Visa Inc., contains several online budgeting calculators including a printable gift log to track the money you spend on gifts (www.practicalmoneyskills.com/calculators). You enter everyone on your gift list and how much you plan to spend; then, as you buy gifts, enter the actual amount spent and click "Calculate" to add them up. This tells how well you’re sticking to your budget and warns when to economize.

Shop online. Think about all the time – and gas – you waste wandering from store to store, looking for inspiration. Even if you choose to buy things in person, at least do your initial research online. It’s a great way to find ideas and many Web sites, like www.shopping.com and http://shopping.yahoo.com, let you compare prices at different stores to find the best deals. Many Internet retailers also offer free shipping if you shop early enough.

Plan ahead. You’ve only got a few weeks to pull everything together, so make a list of everything you need to do and plot it out on a calendar. Maybe that means writing holiday cards on your lunch hour or shopping online while watching the news, but isn’t that better than staying up all night putting together a bicycle?

This is supposed to be a joyous time; don’t let the temptation to overspend ruin your holidays – and make you pay for months afterward.


This article is intended to provide general information and should not be considered health, legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.