11 Holiday spending blunders that lead to financial hangover
by Amy Nickson
The most joyful yet expensive month of the year has come. Yes, I am indicating the holiday season when most of the Americans plan to spend more.As per the American Research group report, people are planning to spend nearly $900 or above on gifts this year. The end of the year is full of fun but overspending during this time may take a toll on your finances; especially, spending mistakes can make your financial situation worse. Enjoying the holiday beyond your means can create a “financial hangover” by the time January rolls around. Take a look at these spending mistakes to stay top on your finance during this festive season.
1. Refusing a holiday budget
Holiday months are costlier than other months of the year. So, following the old budget during the holiday season is a mistake. Revise your budget and modify it according to the holiday expenditures. Cut down unnecessary expenses.
Make a list of all holiday expenses like outfits, gifts, decoration supplies, and Christmas party supplies (if any), etc. Estimate these various costs and add them to your budget. Allocate money for each category and stick to it. By doing this, you can manage the overblown costs.
2. Having a fuzzy plan
If you’re planning a family holiday trip, then you should be extra watchful towards the expenses. Travel expenses along with expensive holiday expenses, like gifting and partying, can break your budget.
Keep one plan, either holiday travel or partying at home. Thus, you’ll be able to enjoy holidays without welcoming financial issues.
3. Considering last minute shopping
Waiting until December to buy flight tickets, gifts, or decoration supplies, is a blunder. Last minute shopping cost you more money. If you start early, you’ll get discounts and deals on your shopping. Catching up post-holiday sales to buy next year’s holiday supplies (decoration supplies, stocking items, and gift items, etc.) is a wise decision to consider.
4. Accumulating credit card charges
Remember, if you cannot pay in cash, you cannot afford the item. Some studies revealed that people spend more with credit cards. If you continue shopping using credit cards and don’t pay the bills on time, you’ll rack up credit card charges. So, use cash or only one credit card to make sure that you can pay off the bills easily. Thus, you won’t accumulate interest payments.
5. Tapping retirement accounts to meet holiday expenses
According to the T. Rowe Price report, nearly 11% of shoppers withdraw money from their retirement account to fund holiday expenditures. But tapping money from retirement accounts to pay for holiday expenses is a wrong financial move; the reason being that withdrawing money before the age of 59-1/2 will be subject to a 10% penalty. You have to pay taxes on your withdrawal as well.
So, it is always better to excuse your dedicated retirement account and think other ways to meet holiday expenditures.
Setting aside a certain amount every month, throughout the year, is one of the best ways to save for holidays.
6. Neglecting gift cards
Some people have no interest in shopping using gift cards. But they don’t know that gift cards are as good as cash. This holiday, use gift cards to purchase gifts for your dear ones.
If the gift cards you have don’t help to buy things that you are looking for, then turn them into cash. How can you turn gift cards into cash? It’s easy:
- Sell those unwanted gift cards at the online marketplace. For ex: eBay
- You can also sell gift cards through specialized gift card exchange websites like Cardpool, CardHub, and Gift Card Granny. You’ll get the value back in cash.
7. Buying expensive gifts to earn reward points
People are now the devotee of credit cards. They use credit card for every purchases to earn reward points. Shopping out of the budget to buy pricey gifts to earn points is a foolish act that can lead maxing out the credit card.
8. Buying costly presents to impress
Giving gifts to everyone in your list is a nice gesture, but buying extravagant gifts to impress others can lead to major financial damage. Most of the people prefer a well-thought gift instead of a costly one. Pick simple yet thoughtful gifts this year.
9. Forgetting to shop around
Comparison shopping is a good way to save some dollar on purchases. However, shopping around doesn’t mean you have to visit each store one by one. Just go online and visit online portals to take a close look at prices on items that you want to buy.
10. Losing receipts
Keeping all receipts of holiday purchases is important. You might get a defective or wrong item, especially if you buy the item on discount. Keeping the receipt make the return process easier and hassle free.
11. Saying “yes” to extended warranties
Buying an extended warranty on electronic purchases is a boo-boo. It will cost you more but provide only limited coverage. So value your hard earned money instead of wasting money on this useless concept.
Finally, saying “yes” to the children who want a big ticket item is the biggest mistake. Apart from gift buying and pampering, you have to meet some unavoidable bills. So, say “no” to the Disney trip or the costly game that are in your children’s wish list. Holidays are meant to enjoy not for overindulge. Following this mantra will allow you to enter the “New Year” fresh without fearing about the huge amount of unpaid credit card bills.
Author’s Bio: Amy Nickson is a web enthusiast. She shares her expertise through her crisp and well researched articles based on money management, money saving ideas, debt and so on. You can follow her on Oak View Law Groupwhere she shares her expertise on personal finance field.