By Amber Miller, CFP®
Please be honest: Have you ever over spent on gifts for one of these special occasions: Christmas, Hanukah, Anniversaries or Birthdays?
If the answer is yes, this post is for you! Below are 5 action steps you can start today to never overspend again, as well as a few common shopping mistakes to avoid. With the holiday season upon us, we’ll use Christmas as an example, but these tips apply to any special gift giving occasion.
It’s not a surprise
If you remember nothing else from me today, remember this: Christmas is not a surprise. It happens LITERALLY every year. (As do Hanukah, birthdays, and anniversaries.)
Create a plan
The best way to avoid overspending is to plan for it. How do you plan for it, you ask?
- The first step is to go to your bank and open 1 new savings account and give it a name. I suggest calling it “Holiday Gifts” or “Christmas.” Be specific.
- Give yourself a budget. When I work with clients, we use the “no judgement zone” when we talk about budgeting and cash flow. Be honest:
- Look back – how much do you usually spend?
- How much would you like to spend?
- Is that ideal number more or less than you actually spend?
- Remember: this is a Judgement Free Zone. We’re not making judgements on why you over or under spent, or what you *should’ve done differently in the past. Get clear about your habits and wishes.
- What is the number?
- This step is easy: Divide by 12.
- Set up a monthly auto-transfer from your checking account to this new savings account monthly.
- Pick the day of the month – it doesn’t matter when – just automate it!
- The key here is this: you don’t want to think about it. It just happens every month.
- **Pro Tip: select a date early in the month to fund December before the Holidays. You can even align it with your paycheck.
- This is the trickiest step: Only spend from this account.
- If you’re on vacation with your father-in-law in July and he mentions something he’d really like this year, keep note of that. You may even go out and buy that item in July for him….but only if you have money in your Holiday Spending account to pay for it.
- *Pro Tip #2: never use credit cards to pay for gifts. You’ll end up paying up to 17-19% more for the gift in the long run. If you don’t have the money in your account, you simply can’t buy it.
Marketers and Cyber Scammers
Now that you’re all set up for your Holiday Spending, remember that marketers and stores are going to do everything they can to get you to buy extras, and cyber criminals are out there doing their best to scam you.
Don’t let those hard earned dollars to cyber criminals…here’s a reminder PSA with 5 cyber tips for this season:
As for avoiding the shiny extras and “great deals” the stores will entice you to buy, I recommend you make a list of names you’d like to give to this year (don’t forget white elephant gifts, co-workers or charities) and make a spending plan – what do you want to give to each person on your list? This way, when you get to the store, you won’t be tempted to buy those extras, no matter how shiny they are or how close to the check-out counter they’re placed.
It’s People, not things, that matter.
Now that we’ve discussed your 5 point action plan for Holiday Spending, don’t miss the point: It’s people, not things, that matter.
Spend time with your people – laugh with them, cook and eat with them. Listen to their stories. Most often, time is the best gift of all. As financial guru Dave Ramsey is quoted saying, “Your decisions from today forward will affect not only your life, but your entire legacy.” Here’s to helping you make good decisions…
Happy planning, spending and laughing this Holiday Season!
Amber Miller, CFP® is a Financial Planner in the Twin Cities office of The Planning Center, a fee-only financial planning and wealth management firm. In her non-work hours she worries about hiking, rowing, reading and how to share more time with the great outdoors…
Please email her at: firstname.lastname@example.org.