6 Things You Should Never Do With Your Finances During the Holiday Season
Written by
John Csiszar
Edited by
Amber Barkley
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Just like the holiday season often triggers overeating, it’s also a time when many let their financial discipline slip, as well. Between the festive mood of the season, the endlessly effective marketing and the natural generosity of human beings, many people end up with bigger-than-usual credit card bills by the end of the year.
While there’s nothing wrong with giving gifts to friends and loved ones, if you don’t keep an eye on your finances, you could find yourself perpetually playing catch-up with the prior year’s debts. This can wreak havoc on your long-term savings and investment plan, so it’s something to be avoided. Here are some things you should never do with your finances during the holiday season if you want to keep yourself on track.
Overspend Your Budget
The best way to avoid a year-end financial disaster is to make a holiday budget. Unlike truly unexpected financial emergencies, such as a major car repair, holiday spending is something predictable. Rather than trying to squeeze your year-end purchases into your regular budget, make a line item for “holiday spending” and stick to the amount you choose.
Better yet, save a little bit every month during the year and shovel it into a separate account so that you can draw from it to pay for your holiday expenses.
For example, if you plan to spend $1,200 every year on gifts, food, decorations and other holiday purchases, start saving $100 per month throughout the year. When year-end arrives, you’ll have a pot of money to cover your costs rather than having to put everything on a credit card.
Leave Yourself Vulnerable to Marketing
Social media is great for many things, but helping people stick to a budget is not one of them. Facebook, Instagram and TikTok posts, particularly during the holiday season, are usually chock-full of photos of people throwing extravagant parties or showing off expensive trinkets. Your daily feed is also likely crawling with attractive ads marketing products specifically tailored to your interests.
It can be all-too-easy to “pick up a few things along the way” as you’re busy shopping for others, so keep that impulse contained.
Max Out Your Credit Cards
Credit card balances naturally swell during the year-end holiday season, as Americans invariably go over-budget and end up charging more than they can pay off right away. While making the occasional interest payment for a month or two won’t kill your finances, maxing out your credit cards will.
Not only are maxed-out balances hard to knock down, your high credit utilization will decimate your credit score. If you plan on applying for a home mortgage, a business loan or even another credit card, a poor credit score might result in denial of that loan application — or, at best, an approval at a high interest rate. In other words, don’t make short-term purchasing decisions that can derail your long-term financial plans.
Be Too Generous
In some people, the spirit of the holidays awakens a gift-giving spirit that can lead to being too generous. While you shouldn’t overlook loved ones like your family members during the holiday season, this doesn’t mean that you need to lavish them with diamond rings and new cars. It also doesn’t mean you should broaden your circle of generosity to everyone you’ve ever met.
Keep your gift-giving circle tight and stifle the urge to be too generous if you want to keep your finances in line.
Take a Last-Minute Trip
Travel over the holiday season is always more expensive than at other times of the year. Compounding that problem is if you decide to take a holiday trip at the last minute rather than planning it out in advance.
Deciding on Dec. 15 to hop over to Paris for Christmas and New Year’s, for example, is likely going to cost you two or three times as much as if you had planned that trip in February instead. Even a more local trip can still bust your budget, as last-minute hotel pricing — if you can even find availability — is likely to be outrageous.
Blow Your Year-End Bonus
You should never “count” on a year-end bonus to boost your finances, even if it’s something you regularly earn. If you rely on receiving that money, it makes it much more likely that you’ll “pre-spend” it, putting holiday charges on your credit cards while anticipating that you can use your bonus to pay them off. But if your bonus isn’t as big as you expect, or if you don’t receive a bonus at all, you could find yourself in a serious financial bind.
One of the best ways to use a year-end bonus is not to expect it or spend it, but to save and invest it. Most financial advisors suggest that any type of “found” money, from year-end bonuses to tax refunds and inheritances, should not be seen as expendable cash as much as a source of investable funds.
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