Editorial Policy

5 tips to keep you on budget this holiday season

Erica Sandberg

November 14, 2014

QHi Erica,

Every year, I make up a holiday budget, and every year, I blow it. I just see something I think one of my kids would love, and I buy it without thinking through the consequences. I just “have” to get it, and feel if I don't, my kids' Christmas will not be as good. I'd appreciate any advice you can give me about this. –Janice

ADear Janice,

Don't be so hard on yourself. Not only do millions of other people shop 'til their bank balances drop, but it's perfectly natural to do so. Psychologists at the University of Sheffield in England studied why so many of us continually do something — whether it's overeating or overspending — despite the predictable negative result down the road. It's aptly called the Ostrich Problem. Turns out we humans are hardwired to do what's pleasant, then stick our heads in the sand, pretending all will be just fine even when we know it won't.Ask Erica

But does that mean we can't change? Not at all. First, you have to be aware of this tendency and, second, you need to take steps to adjust your behavior.

You clearly know that you don't want to shop to such a degree that it puts your overall financial wellbeing in jeopardy again — so put a better plan into action. Here's how to ensure a debt-free, yet still joyful holiday season.

1. Refuse to equate Christmas with consumer items. Take cues from “How the Grinch Stole Christmas.” The Grinch stole all the gifts from the townsfolk, but when the big day arrived, he was shocked at their reaction: “Every Who down in Whoville, the tall and the small, was singing, without any presents at all! He hadn't stopped Christmas from coming, it came! Somehow or other… it came just the same.” So, the day will come and go, no matter what you give or don't give. Make it wondrous in more profound ways.

2. Figure out what you're happy to spend. Feel calmer already? Great. Now take a good, long look at the cash in your savings and checking accounts, then decide how much of it you're comfortable parting with. This is what you'll spend for all holiday-related things, including gifts, decorations, travel, special events and extra food. Even if it's a tiny sum, respect its limitations. Accept that you will not have enough for everything. No one does.

3. Make a list and check it twice. Now parcel out the funds. Write down what you want to buy, keeping that predetermined figure in mind. If you don't come out at least even, rework the numbers until you do. For example, let's say you have $1,000 to spend. Five people on your gift list get presents totaling $100 each. You've spent half your money. What are you going to do with the rest? A tree, some lights to replace the broken ones and a special dinner might suffice for the remainder. Don't stress out over this task. Instead, enjoy the process of mindful, realistic, healthy spending.

4. Shop with the right tool. If you have a rewards card, use it for all the purchases. You'll rack up points transferable for cash back, miles or products. And because you know you have the money to pay for everything you charge, you'll come out ahead. In the absence of this type of credit product, use another credit card or your debit card. The statements make it easy to track spending. You'll also enjoy the consumer protection cards offer. Cash is risky, as you may leave your wallet at the checkout counter while in an end-of-shopping day haze (as I once did). Lost or stolen money is gone for good, but if thieves get your plastic, you can stop them with a phone call.

5. And finally, every time you shop for something holiday-related this year, keep the receipts and tally them up at the end of the day. In the Ostrich study, researchers found that dieters ate fewer chocolates during a taste test when they were asked to leave their wrappers on the table as opposed to tossing them in the trash. Consider the shopping receipts as candy wrappers. Chances are, you'll find sticking to your spending limit easier by employing this one simple self-generated monitoring system!

Got a question for Erica? Send her an email.