Having a financial plan is the key to avoiding overspending this holiday season, according to two finance professors at the University of Texas at Dallas. Finance professors Jeff Manzi and Randy Guttery say consumers should follow these simple steps as they complete their holiday purchases.
1. Construct a budget and stick with it. Go back and look at last year’s checkbook and receipts from holiday spending. Decide how much you want to spend this year, including holiday gifts, events and travel. Planning ahead allows you to look for bargains, coupons and offers like free shipping. Make sure to keep track as you spend.
Make a list and check it twice.
2. Be flexible and willing to trim your shopping list. Buy for families or couples, instead of individuals, or buy gifts for the children in your family, but not all the adults. Decide who and how much before heading to the stores.
4. Buy gifts online or purchase gift cards. If you shop online, you’re less tempted to impulse buy. Gift cards allow you to stick to your budget easier.
5. Pay with cash. It’s always smarter to make purchases with cash you have available in your checking or savings account, rather than racking up debt and interest, even if you think you can pay it off immediately. Never take a cash advance against a credit card.
6. Keep it simple. Instead of spending money on a loved one, spend time with them. Go to a movie or out to lunch. Help your children create gifts or bake treats. Rather than hosting a lavish holiday party, ask everyone to bring a potluck dish and BYOB.
7. Look ahead to next year. Holiday spending comes every year, so don’t let it sneak up on you. Make a 12-month budget with a free app, such as Mint. See if your bank or credit union offers a Christmas club so you can put away money all year.
Good luck and happy shopping and saving!
Jeffery Manzi and Randy Guttery are clinical professors of finance and managerial economics at UT Dallas.