Friday, January 8th, 2016
With the holidays behind us and a new year ahead, your finances are likely in one of two positions right now: either you managed to keep your spending on track in December, or you went over your holiday budget. The new year is supposed to be a clean slate — a chance to start fresh and a time we can set and tackle new financial goals. If you're weighed down by holiday debt or have to pinch pennies this month to make up for last month, it can feel like anything but a fresh start. Here are three suggestions for how to get your finances on track, so you don't find yourself in this position again next year.
1. Set a realistic budget
First, start by adding up every penny you spent on this past holiday season. Make sure you include everything, from the presents you put under the tree to the gifts you gave anyone who hosted you for dinner, and any clothes or accessories you needed for holiday parties or family pictures. When you're done, look at the final number and ask yourself if you're comfortable with that amount. If you are, that's great. But if you'd like to challenge yourself to spend less next year, start with a realistic goal. Could you shave 10% off the total bill? 20%? More? Come up with something realistic, so you can actually meet it — and feel good about your holiday spending next year.
2. Save for the first 10 months of the year
A lot of the advice I've read about saving for the holidays suggests that you should save for the holiday season all year. That means taking your budget, dividing it by 12 and saving that amount every month from January through December. Personally, I think we should have the full amount we need saved up by the end of October. Think about it: holiday events seem to be starting earlier and earlier, and many people like the idea of finishing their holiday gift shopping before December 1st rolls around. Money seems to be tight for most people in the final two months of the year, so why not save everything you need before you even get there? My recommendation is to take your new budget, divide it by 10 and save that amount every month from January through October.
3. Create some shopping rules
Finally, even when you have the money set aside, it's still all-too-easy to go over budget during the holidays. Before you spend a single penny on the next holiday season, create some shopping rules. For example, maybe everyone in your family agrees on a maximum dollar amount to spend on individual gifts, or you decide to do a Secret Santa within a group of people. You could also do things like decide to bring baked goods to hosts who invite you over, versus expensive bottles of wine. It's your holiday season and your budget, so your rules will be unique to you. But have them ready before you start your shopping, so you can stay on track — and feel good about your spending at the end of the year.
In reading all of this, you might see how these suggestions could be adapted for any of the financial goals you want to tackle this year. Whether you want to pay off debt or save for something, set a budget, figure out how much you can allocate towards it each month and stick to the plan. That's the recipe for a happy and (financially) healthy new year!