Do Not Spend Yourself Into Bankruptcy This Holiday Season

How to Manage Your Budget This Holiday Season

Credit: Daly and Newton

Everyone thinks that August is still summer, but it’s really the beginning of the Great Spending Crush that comes at the end of every year. People don’t just empty their pockets and clean out their bank accounts for Christmas and winter holidays. That’s just the last in a line of money-sucking events that actually starts as bathing suits are still dripping wet and we haven’t even unpacked from the annual family trek to the mountains yet.


The Realities of Seasonal Spending (and Not Just Christmas)

You've barely recovered from those two weeks with three kids crowded into the back seat during the whirlwind tour of the western U.S., and now you're fitting them for new school clothes and sifting through Frozen and Spider-Man backpacks. Families spend an average of $488 on back-to-school gear as of 2016. 

But wait, what about Halloween? Costumes and candy for cute little ghosts and witches will cost you another $75 or so, and that doesn't include the cost of a party or two. Thanksgiving dinner will run about $56, plus the trip to Grandma’s house. AAA reports that the national average cost of a gallon of gas is $2.23 as of October 2016. And that’s all before we even get to Black Friday.

It's all just practice leading up to the main event: Christmas. It's recommended that you spend no more than 1.5 to 2 percent of your family's gross income on holiday-related events and gifts.

That comes out to a cool $750 to $1,000 for a family with an income of $50,000. But according to MarketWatch, 62 percent of Americans have less than $1,000 in savings. Only 21 percent even have a savings account.

Do You Plan or Charge?

So where does that holiday money come from? Do you plan for it? Is it in your budget?

Or maybe you wing it, picking up the slack with credit cards or payday loans like 37 percent of Americans do. Then the bills start piling up in January.

Half of us will have Christmas paid off by the end of January. You probably used your cards for convenience or to take advantage of a rewards program. Then there are the rest of us. 

  • 23 percent will pay off holiday spending by the end of tax season. 
  • 13 percent will do so by the end of the summer.
  • 6 percent will pay everything off by the beginning of next holiday season. 
  • 6 percent will still be paying past the end of the next holiday season.

Using credit to finance Christmas just increases the cost even more, but perhaps you feel that you have no choice. We average $271 per child each Christmas, and many statistics show that we spend much more than we plan for or will admit. 

Perhaps this is the year you might want to consider changing your overindulgent ways and rein in your spending. Making that happen takes fortitude and planning. You’ve heard the admonition that you shouldn't go to the grocery store when you're hungry. The same applies here. Don’t do your Christmas shopping at the last minute. The earlier you start taking action, the less stress you’ll have and the more you’ll save.

How Some Folks Approach Gifts for the Kids

  • The Rule of Four:  Each child receives something they want, something they need, something to wear and something to read. I would venture to say that this works best if you start the kids off early. It may be hard to get your 12-year-old to buy into that scheme when holidays were always more lavish before. 
  • Save Random Purchases: Avoid random gifts in the months leading up to Christmas. I have friends who purchase something for their kids every time they go into a store together. If they held off on some those goodies, they could have put them under the tree instead. 
  • Concentrate on the Stocking Stuffers: Wrap up a bunch of small, clever, inexpensive gifts. How about little puzzles, a bag of exotic-sounding chocolates, a pair of inexpensive earrings, pre-owned video games, even a lottery ticket or two? Stores like Cost Plus World Market and Dollar Tree have treasure troves of inexpensive gifts you won’t find in your average toy store.

    Where's the Money?

    Some old tools for saving that we used many moons ago are starting to show up again and are worth a look. Here are some clever ways to save up. 

    • Christmas Clubs: They're offered by banks to encourage depositors to save a set amount each week or month all year. Come December, the account will have earned a little interest and you'll have a nice pool of cash for gift purchasing. What keeps you from cashing it out early, say in April? There’s usually a penalty for early withdrawal.
    • Layaway Plans: “Buy” your gifts in September and the store will hold onto them for you. You pay something each week or month, then pick them up from the retailer when they’re paid off. Some stores even allow you to make payments online.
    • Gift Cards: Pick up a gift card or have more cash added to one you already carry each time you go to the store. It’s a savings account that you can put in your back pocket until you need it. This works if you’re tempted to use the money you see sitting in your savings account when you check your balances online—out of sight, out of mind.
    • Automatic Savings: Some banks will transfer $1 or so into your savings account every time you use your debit card. 
    • Couponing: It may be time to bite the bullet and start couponing. Here’s what I’ve found makes this approach more tolerable: the thrill of the hunt. Coupon sites abound all over the Internet. Brand and store websites offer coupons with a click. Some products will give you a coupon for just liking their pages on Facebook. 
    • Change Jar: My family once threw our pocket change into a small plastic barrel for an entire year. By the end of the year, we had amassed $800 by the time the holidays rolled around. 

    Have a merry debt-free Christmas!