Manage Your Money Carefully This Holiday Season

November 09, 2011
Financial Focus

As you know, the holiday season can be joyous, hectic, celebratory - and expensive. And while you certainly enjoy hosting family gatherings and giving presents to your loved ones, youíll find these things even more pleasurable if they donít add a lot more weight to your debt load. And thatís why youíll want to follow some smart money-management techniques over the next few weeks.

To begin with, try to establish realistic budgets for both your entertaining and your gift giving. When you host family and friends, donít go overboard on your expenditures. Your guests will still appreciate your efforts, which, with a little creativity, can create a welcoming and fun experience for everyone. As a guiding principal, keep in mind these words attributed to Johann Wolfgang von Goethe, the famous German poet and philosopher: ďWhat you can do without, do without.Ē Set a budget and stick to it.

And the same rule applies to your gifting. You donít need to find the most expensive presents, or overwhelm recipients with the sheer volume of your gifts. This is especially true if you, like so many people, have been affected by the tough economy. Everyone you know will understand that gifts donít have to be lavish to be meaningful.

Furthermore, by sticking to a budget, you wonít be tempted to dip into your long-term investments to pay for fabulous parties or mountains of gifts. Itís never a good idea to tap long-term investments for short-term needs, but can be especially bad when your investment prices are down, as they may well be this year.†

So, if you want to stick to a budget but you donít want to raid your investments, how can you pay for your holiday season expenses?† If you can spread out your purchases, you may be able to pay for them from your normal cash flow. But if thatís not possible, you might want to consider† ďplasticĒ - your credit card.† Using your credit card does not, by itself, need to amount to a financial setback, especially if youíve chosen a card that offers favorable terms and youíve already shown the discipline not to over-use that card. Just try to minimize your credit card usage over the holidays and pay off your card as soon as you can.†

Of course, you can make your holiday season much easier, financially speaking, if youíve set up a holiday fund to cover your various expenses. While itís too late to set up such a fund this year, why not get an early start on the 2012 holiday season? All you need to do is put away some money each month into an easily accessible account, separate from your everyday accounts. You donít have to put in a great deal, but you do need to be consistent, which is why you may want to have the money moved automatically, once a month, from your checking or savings account to your holiday fund. When next yearís holiday season rolls around, you might be pleasantly surprised by how much youíve accumulated.†

But for now, following some common-sense money management practices can help you get through the holiday season in financial shape - and that type of result can get your new year off to a positive start.

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