Amanda Del Buono is a financial planner who believes that wealth should never be defined by a dollar sign. She gives mad advice at www.pearlwealth.com and mad love at www.mandajuice.com
Every November my husband and I sit down and map out a very careful Christmas budget. X dollars for this kid, so much for that one, our decorations, cards, booze. We’re about as anal-retentive as two people can get when it comes to planning.
And yet? Every year I’m shocked to open my VISA bill in January and find that we’ve spent a good deal more than we intended. Last year, we went over by nearly 50%(!). My only response was to transfer the extra cash from our savings account, pay the bill in full and weep bitter tears of shame that instead of growing like it should have, our savings account made a not-unnoticeable dip in January.
This year I’m back in the financial planning saddle again, both personally and professionally, and determined not to repeat last years’ mistakes. Of course, I’m not talking about the overspending. Nope. I won’t touch that with a ten-foot pole. That’s pretty much inevitable. You show me a Christmas budget – even one as perfectly planned as my own – and I’ll show you a hundred ways it can go awry. We ALL overspend.
What I’m talking about here is how to deal with the aftermath. By the time your VISA bill arrives, you’re long past the post-coital glow of Christmas morning. You’re just trying to make the wet spot as painless as possible. Here are some strategies that might help:
1. Divide and conquer!
Instead of just paying the bill, break it down. Figure out the error of your ways. Pull out your receipts and figure out EXACTLY where your spending went over budget. I don’t suggest this simply as a method of self-flagellation, but because knowing SPECIFICALLY how you overspent will give you an easy way of planning NEXT YEAR how to better forecast your spending and make more informed decisions.
2. Pay as much as you can.
This one rather goes without saying, but if you CAN pay off your entire VISA bill in January, you likely should. What you shouldn’t do is waste a lot of time castigating yourself if you can’t. One of my favorite financial planning strategies is the simplest: 50/50. Pay half now. Make a plan to pay the other half as soon as you possibly can.
3. Make a detailed gift list.
I royally suck at remembering numbers. It’s probably a professional hazard – I see a LOT of them, the cobblers daughter has no shoes, etc. And they become even more difficult to distinguish after 12 months. I can tell you EXACTLY the ratio of meats in my famous Christmas meatballs (33% lean beef, 33% veal, 33% pork, 1% MAGIC), but I can’t tell you what I gave my sister-in-law last year for Christmas unless I WRITE IT DOWN. So I do. Last year I gave her a $30 Target gift card, which was the exact same thing she gave me. By keeping a list of every gift given and received, again, you’ll have a better diagnostic tool at your disposal next year. Do this while you’re writing your thank you notes and you kill two birds with one stone.
4. Start saving NOW for next year.
Now that you’ve divided, conquered, detailed and wept, go ahead and start saving for the next holiday season. I mean it. Even if you haven’t finished paying for the holiday we’re just finishing, it’s never too soon to start saving for the next one!
Do you have any tips to share?
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One tip: Cash.
I know this isn’t possible for everyone, but we save every month for Christmas. In cash. In an envelope, that is safely tucked away until Christmas shopping. That makes it so much easier to not go over-budget; if I spend too much on one person, all that means is that I have less to spend on others. And, bonus, no credit card bill in January!
Sara | December 30th, 2009 at 2:51 pm
This is all very good advice. Thank you.
Number 3 also helps avoid giving people the same thing two years running. Even if it’s a gift card, I like to mix things up a bit!
I paid cash or Amex’ed Christmas this year. My January Amex bill will be killer, but it will be paid in full by the end of the month. I could never keep my promises to myself to pay off the VISA bill in January. It was too easy to let the balance slide over into February or March….or worse.
To Sara’s point about saving throughout the year–what ever happened Christmas Clubs? Back in my early 20’s, when I had my first job, I’d put some money away in my Christmas Club account at US Bank every payday. Then, late-November, I’d have a nice little check to do my shopping with. I don’t recall if it paid any interest, but it was a good way for someone who didn’t have a ton of self-discipline to save for the holidays.
Sheryl | December 30th, 2009 at 7:05 pm
Great post! This one is going in my Notebook of Anal Retentiveness. I never consider writing a gift list - BRILLIANT! Thank you
Jocelyn | December 31st, 2009 at 2:22 am
I love your financial advice! Maybe we’re old fashioned, but we don’t use credit cards for anything (personal, the only cc I have is for my business). We budget for gifts and pay for everything with cash. It really helps to keep the over-spending in check (not just at Xmas but all year long), and best of all, no January Visa bill hangover!
Stefania | January 2nd, 2010 at 4:37 pm
I didn’t do any last-minute Christmas shopping in 2009. Whatever wasn’t done by the Saturday before Christmas didn’t get done. It was mainly because I had car trouble and a sick kid. But it probably saved me a chunk of money. Those last-minute purchases that we do to “round out” or “balance” things can really add up.
I spent most of my Christmas money on gift cards this year. This didn’t actually save me any money, I don’t think, but I think that if I plan on doing the same for the coming Christmas, I can do it in a more cost-effective way.
SKL | January 4th, 2010 at 12:56 am
I think this article glosses over a very important rule and that is DON’T use a credit card to fund your gift giving. For the last 10 years or more I have not used a credit card or ANY credit to buy xmas gifts for my kids and friends and family. Yet still I get them ipods, iphones, laptops, clothes, all the goodies. Remember when your parents gave ou a VISA and said use it for emergencies only? That should still be the case.
Here’y my xmas shopping advice:
1. Make a list of friends and family you want to buy gifts for. Make it now for next year. Add and delete as you go thru the year. Set a limit per person if you must - and stick to it. You might find that by following these tips you can actually get MORE for your $$ without racking up the VISA bill.
2. Always be looking for a deal for something on your list. Amazon and other sites will frequently drop prices on certain items during the off months. Add the items from your xmas list to your Amazon cart (or the ecommerce site of your choice) - and visit it every now and then to see if prices have changed. If you see a deal on something - buy it! But not with a credit card. Look for sites that offer free shipping and no sales tax for your state. Saving on shipping and sales tax is huge. If you can check your list and cart once a week or more, you will find some amazing deals. I start buying xmas gifts in the summer.
3. If a deal looks too good to be true, it probably is. Shop an item around. Use google’s price searching service (www.froogle.com) to check the price of an item before you buy. You may think its a great deal but how can you be sure? Use “reviews” to determine if an item is worth getting. Actually read the reviews.
4. Avoid the Black Friday loss leader junk. How can Target or Walmart sell a plasma tv for $99? Because its a bunch of junk. It may sound impressive but you are getting what you pay for, a cheap TV. Avoid these junk items like the plague. Keep your eye out for the more modest specials that are often overlooked. That’s where the real value versus cost comes into play.
Remember, don’t live beyond your means, don’t buy a house whose mortgage you can’t afford to pay when life throws you a financial hiccup and don’t pay for xmas with a credit card. Sorry to be preachy but I think sound financial advice starts with helping people understand to spend their $$.
SteveB | January 4th, 2010 at 6:22 pm
I do not use cash, but I do pay off my credit card every month, before any finance charges hit. The credit card offers convenience, accountability, flexibility, safety, and even cost savings (free gift cards, etc.). It has been years since I had any kind of balance on any credit card. So I don’t agree with a blanket “use cash” statement.
SKL | January 4th, 2010 at 8:09 pm
@SKL
Sorry, didn’t mean to single you out!
I think you are one of the rare people that do pay their credit card off in full every month is my guess. A lot of my co-workers and friends are saddled with $15K or more in credit card debt.
SteveB | January 4th, 2010 at 8:31 pm
I have to chime in here and agree with SKL. My husband and I have had credit cards for ten years now and have never (NEVER) paid any interest. We put all of our monthly costs/bills by credit card (Food, utilities, incidentals, etc.) and pay the balance in full each month.
As a result, we have reaped many rewards. ATV’s for the kids. A new camera for me. Free flights. Gift cards. Binoculars for my husband. A free trip to New York for me next summer.
If you able to live within your means, passing up on all of the rewards of a credit card is not wise, either.
Angella | January 5th, 2010 at 1:15 am
An even better idea is, don’t use the VISA (or MasterCard, Discover Card, or American Express). If you have to charge it, don’t buy it. Period.
Cabriogal | January 8th, 2010 at 3:45 am
Why would I save money for next Christmas if I haven’t paid off my credit card bill from this Christmas yet? I think it makes more sense to pay my bills and avoid interest, rather than hiding money and costing myself more in the long run.
Mal | January 25th, 2010 at 12:13 am