Prevent Holiday Debt Hangovers: The Five-Step Program

debt-hangover

Like most Americans during the holidays, Erica Moreno would find herself caught up in a buying binge. “I used to spend way too much money on extravagant gifts for close family members, especially my daughter,” says the single mom, who is a quality control coordinator at a food manufacturing company. “When January came, I’d be stuck with credit card bills that took me until the following Christmas to pay off.”

Moreno’s experience is common, says certified financial planner and author Donna Skeels Cygan, “Many people do well all year long, and then they fall off the financially responsible bandwagon with holiday gift buying.”

The slide from budget conscious to out-of-control holiday spender can be insidious. “We don’t realize how much pressure there is to spend, spend, spend during the holidays,” says Skeels Cygan. “Retailers have the holiday music playing, we are encouraged to whip out our credit cards, and there is a shopping frenzy as Christmas draws near.”

You don’t notice how much financial damage you’re doing during the holiday season until it’s too late, notes Wendy Vallier, a middle school teacher who overspent for a Hawaiian Christmas a few years ago.

“Along with the normal ‘anticipated’ Santa gifts for our girls, my husband and I bought Hawaiian themed luggage and clothing,” says Vallier. “We enjoyed ourselves on the trip by eating at expensive luaus and restaurants, going on helicopter rides, scuba diving, boat excursions—the girls even went zip lining. We also bought loads of souvenirs that collected dust a month later as we struggled to pay off the trip.”

Moreno and Vallier learned the hard way that getting caught up in the holiday season can break your budget. However, by drawing up a plan now you can avoid a spending binge and the resulting holiday hangover with these strategies:

1. Resist the need to impress. “It’s important to recognize that there is absolutely no relationship between the amount spent on a gift and the appreciation from the recipient,” says Skeels Cygan. “Don’t cave in to thinking you must impress others with expensive gifts.”

2. Set a limit. Look at what you can afford this holiday season and set a number you can’t exceed. Money spent on gifts should come from your discretionary income, not the income you have earmarked for things that keep you fed and warm, like rent, utilities, and food.

3. Don’t swipe or click without a gift list. Create a list of gift recipients and assign a dollar value for each one. You can further safeguard your list by using cash instead of credit cards to make your purchases.

Erica Moreno and her extended family set a $50 limit for each present, which includes the white elephant gift exchange for the adults. And for her eight-year-old daughter Moreno only buys presents that are educational or useful.

4. Speak up. If your family spends too much on gifts, be bold and discuss it with them. “Honesty is the best strategy. There is nothing wrong with saying that you’re trying to be financially responsible and are cutting back on money spent on gifts,” says Skeels Cygan. “Friends and family are likely to be thrilled that you led the way for everyone to spend less.”

5. Plan fun experiences. “Time spent together is much ‘richer’ than the typical gifts we buy for one another,” says Skeels Cygan, who gets together with friends and family to bake holiday cookies, instead of exchanging presents. “The experience is a lot of fun and everyone goes home with tasty cookies they can enjoy and give as gifts.”

Being mindful about holiday spending requires willpower and financial awareness, but you’ll find that starting the New Year without a holiday hangover (and money to pay the bills) is well worth the effort.