In all the hustle and bustle of the holidays, it’s easy to get caught up in the spirit of giving and good cheer—and then to feel some regret when reviewing the credit card statement in January.
As the season of giving gives way to the season of New Year’s resolutions, here are a few tips to ease the Holiday Spending Hangover:
Check for Unauthorized or Erroneous Credit Card Activity
In her recent article, Risks and Rewards of Using Debit Cards and Credit Cards, Monica wrote about the protections (or lack of protections) offered by debit and credit cards. With the vast majority of holiday purchases being done either online or with charge cards at the point of sale, the opportunities for fraud are plentiful. One sure way to help ease the holiday spending hangover is to not pay for anything you didn’t actually buy! A good credit card issuer can help catch fraudulent purchases, but some may slip past their attention. And they probably won’t catch “honest mistakes”, such as an over-charge by a careless store clerk, at all. This is all the more reason to review those transaction details—and to look for anything that seems incorrect or out of the ordinary.
Avoid the Revolving Debt Trap
If the holiday gift-giving left you with a higher than planned credit card balance, beware the temptation to let part of the balance remain as “revolving debt”. Revolving debt balances are costly and, like other bad habits, can be hard to get rid of once they get out of control. An idea to compensate for “over-gifting” is to return some of the gifts or gift cards you received, then use the proceeds to help pay off the credit card balance. And if you just can’t pay off the full balance now, create a plan for to pay it off in a definite period of time. The longer it takes to pay it off, the longer your holiday spending hangover will last.
Set Goals for the New Year
Whether or not you enjoy making New Year’s Resolutions, it’s a great time to set your financial goals for the coming year, and can help you avoid a holiday spending hangover in the future. Some tips for setting goals:
- Set “SMART” goals: To have the best chance of meeting your goals, make the goals “SMART”: Specific, Measurable, Achievable, and Time-bound. As an example, rather than a general goal of “spending less and saving more”, a SMART goal would be: “To set aside $5,000 for estimated tax payments due in January, and $5,000 between now and April 15th for a 2014 IRA contribution.”
- Review and Update your Spending Plan: Having a written spending plan is a great way to avoid surprises, to set aside funds for future needs, and to spend consciously. Already have a spending plan? Now is a great time to review and update that plan for the coming year.
- Make it a Family Affair: It’s much easier to stick to a plan when all the “stakeholders” in your household are part of the plan. A great way to get the whole family on the same page is to create a “Family Budget” and to identify some common goals that benefit the whole family, such as the next family vacation. This can also be a great opportunity to teach kids good money management habits.
- Make it Rewarding: It’s much more fun to try and stick to your goals if you’ll get a reward for meeting them. The reward doesn’t have to be of the 14 Karat variety—just something worth looking forward to.
Here’s to a 2015 full of health, happiness, and prosperity!
