How to Avoid Falling Into Financial Pitfalls During the Holidays

Interview with Cecilia K. Holden, Business Operations Manager for Guardian Capital Advisors, LLC

 1. What are some great ways to plan financially for the holidays?

Start by determining the maximum amount you are able to spend on all holiday expenses that fits reasonably within your financial budget. It is best to begin this process in January of each year so the added costs that come with the season are factored into your household annual budget. If you haven’t done so previously, start now and then take this into account in your 2013 budget forecasting.

Project everything you need to purchase during the holiday season, including but not limited to:

o    Presents;

o    Host(ess) gifts for any parties you will be attending

o    Clothing allowance for any new wardrobe items needed for parties you will attend

o    Holiday decorations

o    Entertaining you will be hosting or for which you will be sharing any expenses, including holiday meals

o    Travel expenses for any trips you will take during the season

o    Donations you will make or gifts you will purchase for needy families

Make an itemized list for each heading in the categories listed above and allocate per item the amount you intend to spend on each. Confirm that the sum of all of these items does not exceed the total amount budgeted.

To ensure your allocations are as close to actual as possible, look online for pricing prior to finalizing the list.

Include a safety net in your budget to account for items that are unforeseen in the planning stages and possible increases due to inflation.

Should the amount that you plan to spend exceed the total amount budgeted, look to see where you may be able to make cutbacks or save in ways that will still accomplish the overall end goals. If not, you will need to also include in your future monthly expenses any financing charges that will be incurred as a result of putting things on credit cards, layaway and similar payments.

Before hitting the stores, shop online, scan ads in the newspaper and be on the lookout for coupons that come in the mail. This will provide you with baseline prices to work against before overpaying in the stores.

When shopping online, weigh the cost of shipping against the cost of gas and time spent to shop at store fronts.

Be sure to use the price match guarantee offered by many stores whenever possible. This may eliminate the need to go to the store with the lowest price.

Remember that many stores offer discounts such as AAA, student, military and senior citizen – especially since it is unlikely for cashiers to remind you at the registers. Do not hesitate to ask them if they offer any such discounts when you check out. When it comes to your finances, it is better to be safe than sorry.

To maximize your total annual budget, whenever possible, it is best to shop all year long in order to take advantage of the sales and end of season clearances. For example, if you know you will need new bows or tree lights next year, shop the day after Christmas in order to buy these items on clearance. Stock up on generic holiday-themed gifts at up to 90% off of the original price after Christmas – these will make great host and hostess gifts for next year.

2. What are some of the biggest mistakes people make during the holidays?

Often people tend to overlook things that need to be on the list of items for which to budget. To avoid this, look at the time of year as a whole, and determine all of the things that factor into the season that are not in your typical monthly spending habits.

When shopping, it is easy to get caught up in the excitement of the holidays and pick up a few extra items along the way. When you make a list of items to purchase and the amounts allocated to each, it is critical that you stick to the list and the dollar amounts listed to avoid overspending.

People spend $10 in gas driving to a store to save $5 on an item. Again, do not forget to use the price match guarantee if it allows you to shop closer and still get the better price.

People get sucked in by the “Hoover maneuver” during the holiday season, and store clerks are rewarded to encourage you to pay more. It is incredibly easy to see an extra feature or a larger item and to take the attitude of “Oh well – what is an extra $50?” If you do this too often, before you know it, you are way over your allocated budget. Therefore, when looking at items on your list to purchase, do not even look at items that are not within the overall budgeted amount for that item unless you are willing to lower the allocated amount on a different item.

It is easy to get store credit cards and save an extra 15 percent or so while shopping. Taking advantage of these discounts can be a great way to save money, as long as you take caution against what opening a new card will do to your credit score. Too much credit can ding you on your credit scores, thus costing you if you go to refinance your home or purchase a new vehicle, for example.

It is easy to prolong the financial pains of paying now when you charge expenditures on a credit card. Do not forget that what you put on your credit card in December will be due in January. Otherwise, you will need to budget additionally for the interest charges that will be incurred if you are not able to pay the bill in full.

3. Can you save yourself if you are already getting into trouble or is it too late?

If you find yourself getting deeper in the “red” during the holiday rush, do not give up. Oftentimes people will take the attitude of “Oh well – I am already in deep, so I may as well go all the way and forget my planned budget.”  That attitude will make you your own worst enemy. Stop while you are ahead, and establish a payment plan to get you back on track for the rest of the year.

Do not spend what you do not have. If someone is a close enough friend or relative to be considered gift worthy, they are also close enough to understand if you need to cut back this year. Be honest with yourself and with others, and do not spend money beyond your means!