Oh, look! I can overspend! Awesome!
Hey, if it works for Law and Order, “ripped from the headlines” should work for something more awesome like financial planning, right?
The headline on my local paper today reads BAD ECONOMIC MOOD ARRIVES FOR THE HOLIDAYS. That’s nothing earthshattering.
I’d like to focus on the subhead. It reads, “ECONOMISTS SAY LACK OF CONSUMER CONFIDENCE DOESN’T ALWAYS MEAN LESS SPENDING.”
It should.
It doesn’t take a rocket scientist to understand the severity of the spending problem in America. We’re addicted to buying stuff.
It’s time to break the cycle.
Here’s three signs you’re headed for no-good this holiday season:
1) You head to the store without a budget. Stores spend all year waiting for the holiday season. With military precision, they lay out displays and aisle end-caps to claw money from your pockets. Need proof? How about this: Walmart has already announced that they’ll meet any price, even if you’ve already purchased the item! That’s how serious companies are about you. You need to be equally serious when you hit the mall to buy gifts.
2) You sign up for the department store credit card. I’m inundated each holiday season by “10 percent off today’s purchase if I sign up for the Kohl’s Visa!” …and other garbage promotions. 10 percent off is better than chocolate covered peanuts, but the gi-normous interest rate these store cards charge is where companies earn a monster profit.
3) You buy the holiday season on credit. This next line may sound silly. Ready? Here goes: If you can’t afford it, don’t buy it. The shame you’ll feel in January when the card statements arrive isn’t worth the fun of picking out that special remote control airplane for your favorite financial blogger and charging it. Almost, but not quite.
I know, not rocket science, but most financial planning concepts are simple. It isn’t that you haven’t heard of a concept, it’s that you don’t practice it.
So, to prep for holiday season, here’s your homework:
a) Determine your budget. How much are you going to spend on gifts? On parties? On ornaments and decorations?
Don’t stop there. We aren’t done with the budget yet. Check it twice, they say in the song. Can you afford these numbers and also your long term goals? Are you spending money on presents that should be placed into your retirement fund? ….that you should be spending on health insurance?
b) Place the credit cards “on ice.” I had a client who put her credit cards in a tupperware bowl, filled the bowl with water, and stuck it in the freezer. That way, she had a credit card, but had to think long and hard before de-thawing her funds (talk about frozen assets! Oh, stop, I’m killin’ it!).
c) Create a separate “holiday fund.” When it’s empty, holiday spending is done. Kaput. Finished.
If you want to get hardcore about it (and I know my readers are hard-core savers, aren’t you?), place the holiday fund at a separate bank with a separate ATM card. Set up direct contributions to the account each month from your primary checking account. This way, you’re filling the tank 11 months of the year and draining it one month.
You have choices around the holidays. The worst choice would be to let retailers control your spending habits. By heading into the mall with a plan and sticking to your guns, you control the economy that’s most important to you:
your own.
– joe