Personal Finance

5 Holiday Money Mistakes

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With the holiday season officially upon us, it is easy to overspend. Millions of people will head out in search of the perfect gift for the one they love, meandering aimlessly through every toy and department store, and equipped with nothing more than a list and a credit card.

If that sounds all too familiar, before you spend this holiday season, be sure and avoid these five holiday money mistakes.

1. You’re Driven by Guilt

The gut-wrenching guilt you feel if you don’t buy a gift for your spouse, your parents, your coworkers, your friends, your nieces, your nephews, your garbage man and your mail carrier. The list is endless. Is it really necessary to buy all those people a gift? Will they not speak to you come Jan. 1?

2. You Only Consider the Price Tag

We tend to think the best gift is the most expensive gift. This is simply not true. A 7-year-old recently told me her “top-top” gifts for Christmas — and she said it just like that — are a doggie leash and a doggie bowl for her new stuffed dog she got for her birthday. Those items probably total no more than $15. We tend to put a high value on what we think will make someone happy when in fact the best thing could have little or no price tag at all.

3. You Don’t Set a Budget

If you don’t follow a budget during the year, you most certainly are not going to start now. Mistake! Don’t decide on the amount you want to spend, spend the amount you have to spend. There is a difference.

Take a look at how much cash you have available either at the end of month or in a petty savings account to comfortably spend on the holidays. Put that cash in an envelope. That is your holiday budget.

4. You Don’t Plan

If you find yourself making the first mistake on our list, meaning you’re driven by guilt, realize it is not necessary to give everyone a store-bought gift. Although this is the season of giving, it is important to give within your means.

Once you have determined the amount you have to spend, create a list of the people who will receive a gift.  Divide that list into thirds; the first group gets a store-bought gift, the second group gets a gift card, and the third group gets a homemade gift such as a tin of cookies. This is a great way to keep a handle on spending this holiday season and still give everyone a little something.

5. You Panic

The amount of money that is spent the week before the actual holiday is really what puts most people under water with their finances. You’ve waited until the last minute, nothing is on sale and you’re desperate.  The credit card comes out and the purchase you hadn’t planned for goes on it. The last thing you want to do is to go into debt to make someone happy. Start early, plan and don’t panic.

As we begin this holiday season, if you can avoid these five money mistakes people make, you will truly be able to celebrate the joys of the season. Happy Holidays!

Image: Pogonici

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