Ray’s Take: It was a great holiday. The decorations sparkled, the food was opulent, and the gifts were worthy of the best Santa Claus. However, in a tradition nearly as old as the holiday itself, now the mailbox is stuffed with bills and your bank account is depleted.
It’s certainly easy to go overboard on spending. Everywhere you turned, you encountered reminders to spend more on those you love. The season has become an enormous current that sweeps most of us along with it.
Now it’s “the morning after” and many of us are left with a financial hangover. What’s the cure? We all know what we should do – change our habits now to dig out of this credit hole and then avoid any repetition. But knowing and doing are very separate things.
Start with the basics. Pare your credit cards down to no more than two, and store one in the freezer. Avoid after-holiday sales. Stay away from online shopping. Start a budget now and pay cash.
Make paying off credit cards your No. 1 priority – starting with the ones with the highest interest rate. If you received any cash gifts, use those to help eliminate balances. That’s a gift to yourself that will save on costly interest for months to come. Make a financial plan to have all your holiday spending debts cleared completely no later than April.
Finally, start saving specifically for holiday spending now. The holidays are not a surprise and don’t sneak up on you. They’re the same time every year. Every week, put aside a specific amount in cash and then use that cash and that cash only when the 2014 holidays come around. Not only will you have a specific spending budget then, you’ll have reason to smile when you open the mailbox this time next year.
Dana’s Take: You may actually find some financial relief in the gifts you received. Not only can cash gifts help to pay down debt, gift cards can be used to further reduce spending. If you’ve received gifts you don’t really want, return them. Save the store credit to buy a necessity or an important gift. That’s certainly better than letting unwanted possessions add to closet clutter.
In fact, why not rummage through closets and drawers to identify other things you don’t want or need but someone else might? Then sell them using tools like eBay or Craigslist. You’ll have extra cash to pay bills and more space for the possessions you really value.
Of course, the best course to avoid the dreaded holiday hangover is not to spend so much in the first place. It’s too late for that now, but you could start preparing your family and friends for future holidays with more emphasis on time together and less emphasis on gifts.
Ray Brandon is a certified financial planner and CEO of Brandon Financial Planning (www.brandonplanning.com). His wife, Dana, has a bachelor’s degree in finance and is a licensed clinical social worker. Contact Ray Brandon at firstname.lastname@example.org.