Just like a food diet that helps you watch what you eat, a spending diet helps you manage what you spend. Last year a poll conducted by American Research Group showed that Americans planned on spending an average of $431 on Christmas gifts.  However, intentions are not the same as actions. In evaluating the difference between what people said they were going to spend and what they actually spent, Catherine Rampell, Economics Editor for the New York Times, said, “Consumers may say they’re going to spend less [this year], but they buckle when they actually hit the mall.”

So how can you make a reasonable shopping budget and stick to it? Below are some actions you can take on your spending diet which will make this holiday season more enjoyable and less expensive.

Get organized

First create your own budget and see how much money you have available to spend on holiday shopping. It may not be very much and that is okay. Having an enjoyable holiday season does not mean it has to be an expensive one. What do you enjoy about the holiday season? Visiting with friends and family, singing carols or holiday songs, enjoying a good meal? Some people spend an evening driving or walking around their neighborhood looking at the decorations. 

Make a list of everything you want to buy this season; decorations for all the upcoming holidays, gifts, costumes and special foods. Now review your list and find items where you may be able to cut back. If you plan on having a dinner party at your house, could you make it a potluck instead? Could your children make decorations rather than purchasing new ones from the store? Really evaluate whether or not the items in your list are necessary for enjoying the holidays.

Impulse spending

Leave your credit cards at home and pay cash when you go shopping. Credit cards make it easier to spend more than you budgeted. According to research conducted by Dunn and Bradstreet, people spend, “on average, 12 – 18% more when making a purchase with a credit card as opposed to cash.” When the cash is gone you are done shopping.

Stick to your list. If you have trouble saying no to sales or “good buys”, avoid going to the store without a list or a reminder of what you know you can afford. If only certain stores cause temptation, try to avoid those completely.  Finally, take a notebook with you when you shop. Jot down the items you purchase and the amount of money you have spent. This will help you stay within the limits of your holiday budget.

Reduce the obligations

If you typically purchase gifts for extended family and friends, think about ways to change that tradition. Talk to them about limits on spending, drawing names, simply exchanging cards, or having a get-together instead. Chances are they would like to reduce their spending as well and would appreciate the suggestions.   

Be realistic

Many people feel the need to spend a lot of money on gifts for their children in order to show them that they love them. Others worry that telling kids there is a limit to the amount of money spent on gifts or that they need to scale back the holidays will cause the child to worry about the family’s financial situation. In reality, parents are a child’s primary financial teacher and holidays are a perfect opportunity for learning about budgeting.  However, rather than explaining that they’ll receive less gifts this year due to money constraints, let them know that you’d like to have a simpler holiday. Emphasize being together as a family and creating new, fun memories.  Perhaps spend an evening together baking holiday treats as gifts for friends and neighbors.

Finally, remember, you do not have to accept every invitation to a party, or buy the biggest and the best gift to show someone you care about them. Just like eating a well balanced meal will keep you healthy, a well balanced budget will keep you in solid financial shape.

Are you ready for the upcoming holidays? Although November 28th is the traditional kick off of the holiday season, decorations of all kinds are already flooding the retail stores and catalogues of gift ideas are being delivered by the truckload to our mailboxes encouraging us to get in the “spending mood” earlier and earlier every year. That means you have to budget your holiday spending earlier too.

We at American Financial Solutions have created a special “Holiday Budget” Worksheet so you can keep your Holiday spending in check, ensuring you have a wonderful holiday that you don’t regret after the New Year. Look at the categories we have included so you don’t forget to budget for the things we sometimes forget like postage, wrapping paper, decorations, holiday travel, and entertainment expenses.

Here are some handy tips to help you with your holiday budget planning this year:

• Plan your shopping trips. Know where you are going and what you intend to buy when you get there will save you time, avoid traffic, conserve fuel, and leave more time for the things you would rather be doing during the holidays.
• Do your research! If you know you want to buy a particular product, check the internet to find out if anyone has it on sale. Find out when the retailers near you are having there largest sales. Check your local paper for coupons that give a big discount as well!
• If you are hosting a holiday feast, turn it into a potluck! That way everyone can enjoy each person’s favorite dishes.
• If you find your budget really tight, focus more on spending time with family and friends. People don’t usually remember what gifts they received, but they do remember time spent with family. Homemade goodies like cookies and fudge are always a good idea instead of traditional wrapped gifts. They can also be delivered early and be enjoyed throughout the holiday season.

And finally, use our holiday budget worksheet to set up a holiday spending plan that will help you get through the holidays intact.

Additional budget and financial information can be found on our website at www.myfinancialgoals.org .