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Daily Capital

How To Avoid A Holiday Spending Hangover

All it takes is a glance at the calendar to remind ourselves that the Holidays are upon us. The Holidays are full of festivities with friends and family, which is part of what makes them one of the most wonderful times of the year. However, all that mirth can easily lead to a bit of overindulgence. You might think this is another article about how to not gain weight during the Holidays, but I’m focused on another area of overindulgence – spending.

Wherever you look in the media the number of shopping days left is parroted at us as if to create a sense of urgency. The idea is we need to get out and spend to save money and if we want to “help” the economy then we’ll do our part to go out and spend throughout the Holidays. This urgency, assuming we give into it, can leave us feeling the same way we do when we get on the scale after the holidays are over – regret and resolutions to ‘do better next year.’ Like overeating, when it comes to overspending, the tell-tale sign that we’ve overindulged is our first date with the scale, the credit card bills of the New Year.

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I worked in the financial services industry for almost 15 years and saw firsthand that many of us already know the right thing to do with our money. However, we often don’t abide by what we know we ought to do. In essence, we forget about having a healthy balance that’s needed when it comes to spending. We often forget or disregard the role spending plays in our overall financial picture. After all, you can’t always make more, but you can likely spend less.

Know Your Number

A recent Gallup poll highlighted seeming optimism with regards to consumer spending on Holiday gifts this year. In fact, the survey reported projections of a 4 percent increase in year over year spending to $781, up from $704 last year. It is important to note that the survey was taken in mid-October with a more key survey being taken in mid-to-late November to get a better gauge on where spending will actually be for the season.

Holiday Christmas Spending Trend

The Gallup survey supports a similar survey from the National Retail Federation claiming a similar increase in spending, though also pointing out concern by some consumers about the economy with relation to their spending.

What does this all mean for us as consumers? This all points back to the importance of knowing your number. That number is the amount you want and plan to spend during the Holidays. This number really should not be taken in mind with what the “average” is, but what works best for you and your overall financial picture. Simply put, it comes down to having a budget for your holiday spending.

Just as with anything financial in nature, you need to know what your number is to have success. This is the most important thing to consider when it comes to your holiday spending as it’ll help keep you on track to avoid that nasty surprise in mid-January when the credit card bill comes due. If need be you can even break down this number on a per person level. On the surface this might seem restrictive; however it can be really freeing knowing what you have to spend and knowing that amount is fine to spend; which will only make shopping easier and more fun.

Mind Your Spending Method

Just as how much you determine to spend during the Holidays is important so too is how you’ll be spending it. A recent survey from Statistica broke down the payment methods most will be using for their shopping this year as follows:

  • 61 percent will be using debit cards
  • 46 percent will be using credit cards
  • 43 percent will be using cash

Holiday Shopping Payment Methods
The method you use to spend really isn’t so much of an issue, aside from credit cards, as it should all be done with an eye towards staying within the budget you’ve decided on. Paying via cash or debit card, generally speaking, can help stay a bit better on track as you can only spend what you have. Credit cards, obviously, aren’t that way and thus can present more of a challenge to stick to your holiday budget – though it can definitely be done.

The important thing to remember if you’re placing your holiday shopping on credit cards is that it’s not a blank check. Of course, this is a philosophy that should be followed at all times in order to avoid debt. That said, we all know what it’s like. You’re out shopping for a loved one, you see a “must-have” deal and you choose to swipe that card. As with other areas where you may tend to overindulge, you can avoid a holiday hangover by pacing yourself when you’re doing your shopping. Set limits for yourself if you need to on how many items or how much you’ll spend on any given trip..

Remember too, that credit is not something to be afraid of. In fact, it can be a vital part of achieving financial goals when used wisely. However, this will require tracking your spending during the holidays in order to make sure you’ve not overspent. Again, this is something that need not be isolated to just one time of year but should be practiced throughout the year to better manage your financial picture.

There’s an App For That

There are a number of apps you can use which will not only allow you to stay on top of your spending during this time of the year, but also be used to better guide your overall financial health throughout the rest of the year. Let’s focus on ours.

The Personal Capital platform not only allows you to stay on top of all your spending transactions during this time of the year, but also allows you to do so much more. Through Personal Capital you can link many of your financial accounts, from bank accounts, to investment accounts to credit cards and much more. The idea behind Personal Capital is to allow you to have an easy overview of your total financial picture, including spending, so that you can monitor in relation to your overall new worth and financial goals.

Personal Capital Cash Flow Dashboard
We live in a day and age where there are many things competing for our attention. This can make it a challenge to stay on top of spending as a whole as well as having a way to adequately gauge our financial health. Our spending, even during the holidays, plays a role in things such as our ability to build good credit to saving for retirement to saving for a down payment on a new house to many other financial necessities. Simply put, technology cannot only help you in your day-to-day spending but it can also help you manage your overall financial well-being.

Doesn’t This Take All The Fun Out of Holiday Shopping?

It would be easy to think that budgeting for your holiday spending or tracking what you are spending would take the fun out of the season. That is an understandable feeling, as who wants to pinch pennies while shopping for their loved ones? If you’re struggling with feeling like a Scrooge because you’re planning to stick to a budget this holiday season, ask yourself how you’re going to feel come January. Do you want to feel stressed and not knowing how you’re going to repay your bills or do you want the satisfaction of knowing you made your loved ones happy while also not overextending yourself?

That latter emotion creates freedom while shopping. It allows you to make easier and wiser spending decisions. You can buy nice things for the people you love and shop wisely. The two need not be mutually exclusive. Ultimately, it comes down to a choice and making it a priority to do so. Again, that breeds freedom financially. It gives you the freedom to know what you can spend all with the eye towards your overall financial wealth and growing your net worth. That freedom, once tasted, will only encourage you to do all you can to stay within the parameters you’ve set for yourself financially.

As you’re shopping this holiday season, take a moment and ask yourself if the thrill of the swipe is worth the financial headache that comes with undisciplined spending.

Photo Credit: Raul from Flickr Creative Commons

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The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

John Schmoll is the founder of Frugal Rules, a blog created to help people experience financial freedom through frugality. John is passionate about budgeting, saving and investing and enjoys sharing his knowledge and experience with others so they can avoid making some of the mistakes that he made. A veteran of the financial services industry, John has an MBA in Finance and experience as a licensed stockbroker. You can follow him on Twitter at @FrugalRules
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