The Times-Tribune

Don’t let holiday bills daze you

How to avoid a holiday finance hangover

- BY ANDREW DEPIETRO JESSE MUSTO / STAFF ARTIST GOBANKINGR­ATES.COM

The amount of money Americans spend during the holidays is pretty incredible. In 2015, holiday retail sales totaled more than $630 billion, according to Statista. With so much money being spent, it makes sense that so many people find themselves in post-holiday debt. Indeed, according to the TD Bank Merry Money Survey, 78 percent of Americans have overspent on holiday purchases in the past.

Luckily for you, there are ways to save during the holidays without incurring serious damage. When it comes to recovering from your holiday spending hangover, “The magic is in the budget,” said Lauren Greutman, frugal-living expert and author of the book “The Recovering Spender.” But a budget is just one piece of a smart holiday spending plan, so here are five steps to help you fully recover from your year-end shopping spree.

Get preemptive with your spending plan

Not enough Americans make holiday budgets. Only 52 percent of Americans create a holiday budget, according to the TD Bank survey.

Planning is almost always essential to maintainin­g good financial standing. With holiday shopping and spending, this rule absolutely applies. “Set a budget and stick to it,” said Howard Schaffer of Offers.com. “After every shopping trip, log into your accounts to check your balances. Set up account alerts so you’re always reminded of your purchases.”

Make sure your plan is preemptive, so you have a good idea of how your shopping will affect your budget. Mr. Schaffer suggested setting a spending limit for each person that you’re buying presents for.

On top of a spending limit, plan out your holiday shopping as early as possible. “You should consider budgeting for Christmas starting in January,” said Barry Choi, personal finance and budget travel expert at Money We Have, a budget travel advice website. “Like anything else in your budget, set aside a set amount every month so you’ll have the funds available for the holidays next year.”

Be honest with yourself and know where you stand financiall­y

You can’t begin addressing your holiday spending issues without having a realistic picture of your finances. Realism requires honesty and for you to thoroughly evaluate your money.

“Print out the last three months of (your) spending,” said Ms. Greutman. “Separate everything into categories. Take an average of the past three months spending in each category. This is the number they will start within their budget.” In order to set your money on sure footing, you need to take into account financial factors beyond spending during the holiday season.

“It’s expected that we’ll spend more money during the holidays, but is there a way to cut back on expenses during this time?” said Mr. Choi. “Maybe that means you eat out less or stop buying coffee. Beyond that, how about your regular expenses? Maybe it’s time to renegotiat­e your cell phone and cable bills. Make some sacrifices.”

Make a plan to pay off your debt

“The most effective way to mitigate the damage done by holiday overspendi­ng is to develop a strict plan for saving, paying off credit card purchases and reducing disposable spending in the post-holiday months,” said James Capolongo, head of consumer deposit products for TD Bank. But what are some techniques you can use to address debt incurred over the holidays?

Make a list of your holiday spending and categorize purchases on a scale from the most important expenses down to the least important expense, said Ms. Greutman. “When (people) start to allocate their money, they should start with the most important category and then go down until they run out of money, if they do,” she said.

If you run out of money to allocate to certain categories, these expenses are the ones you need to focus on most to help you recover from the holidays.

Beware of after-holiday sales

Temptation­s are difficult to keep at bay, and one of the most enticing is to keep on shopping, even after the holidays have passed. And with so much momentum going, it can be hard to rein in your spending, especially if you’re surrounded by afterholid­ay sales, even after you’ve already spent so much.

Post-holiday sales prey on Americans’ shopping behavior. In fact, according to TD Bank’s survey, the biggest reason people spend over their budget is because of impulse purchases.

So stay vigilant and avoid impulse buys when you go shopping. But you don’t have to totally ditch after-holiday sales entirely. As many personal finance experts have suggested, making a shopping list and sticking to it can do wonders.

Track where your money is spent

In order to properly track your spending during the holidays, you need to know where the money is going. “Right after the holidays (people) need to assess the damage done to their pocketbook by going through and figuring out how much they spent versus what they planned on spending,” said Ms. Greutman. “Then start by declutteri­ng their finances. To do this they need to figure out where they spend money and where they need to cut back.”

Another useful strategy to keep a close eye on your money is to create a “countdown fund,” said Deacon Hayes, financial coach and founder of WellKeptWa­llet.com. “This is where you put a specific amount of money aside each month for the holidays. For example, if you get paid every two weeks, put $150 aside each check into a savings account or an envelope. Then after four paychecks you have $600.”

So, by the time the holidays get here, you have the cash to pay for things instead of relying on credit cards, Mr. Hayes added. When the holidays are over, you’re good, because everything is already paid for.

Better yet, load that onto a prepaid card so you can still take advantage of online shopping.

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