Why Budgets Can Rein in Holiday Spending

December 18, 2014

by Michelle Perry Higgins

At the end of the year, people spend too much money on the holidays and not enough on year-end planning. It is a time of gift-giving, both to others and ourselves, and retailers are expert at the task of separating us from our money. They use complicated placement and discount strategies based on sound psychological principles to maximize purchases made by consumers who are already predisposed to spend money.

Black Friday 50% off sales or after-holiday 75% off sales are just too tempting for some to pass up.  Money flows like water during this time of year ranging from extravagant presents for family members to the flat screen TV you did not plan to buy.  The best way to control spending during this time is to have a holiday budget. Without the budget you will be like a shopper at the grocery store without a list; you will end up buying things you didn’t really need. Families should not go into debt because of their holiday spending.  Plan accordingly and stay out of the red.

Sample items to budget:

1)    Food and baking supplies

2)    Party supplies

3)    Travel–gas, hotel, tips

4)    Dining out

5)    Host gifts

6)    Holiday cards

7)    Photographer for cards

8)    Postage for cards

9)    Thank-you cards

10) Gift packing, shipping Cost

11) Wrapping paper, gift gags, name tags, tape

12) Charitable donations

13) Food containers

14) Decorations

15) Holiday tips

16) Holiday attire

17) Activities with children

18) Gifts

Year-end tax planning is where I see not enough time or money invested. Accountants can be worth their weight in gold and you should not wait until tax season to meet with your accountant to do a tax projection, especially if changes occurred to your financial situation during the year (e.g. income, real-estate transactions, inheritance, business). If you wait until after year-end, it may be too late to take action that could result in significant savings on your taxes. Should you prepay property taxes that are technically due next year? Do you have loss carryovers to offset capital gains? You won’t know the answers to these and other questions unless you consult your accountant.