The holiday season is a source of stress for many of us. Did you know the rate of deadly heart attacks increase during the holidays? That’s strange, but I guess it’s understandable. Spending time with parents and the in-laws are stressful. However, let’s try to keep calm and not to have a heart attack over it. Money is also a source of stress around the holidays. We’re expected to cook a big Thanksgiving meal and overspend on Black Friday/Cyber Monday. Christmas is right around the corner and we’ll have to buy gifts for all the kids and other family members. New Year isn’t as big a deal, but it could hit your wallet as well if you are keen to go out and celebrate. Whew, no wonder retailers look forward to the holiday season all year long. Today, I’ll share how to avoid overspending this holiday season and still enjoy it with families and friends.
The Best Things in Life
The first step to avoid overspending this holiday season is to remind yourself what the holidays are really about. Thanksgiving is about coming together with families and friends to give thanks for the preceding year. And what a year we’ve had. The economy is doing very well and the unemployment rate is the lowest it has been in a decade. I’m extremely grateful that I’ve been early retired for 5 years and we’re still doing great financially.
We also need to give thanks for our health. This one is tough because we had some minor health issues this year. RB40Jr had the hearing loss issue which was diagnosed as a permanent problem. At least, it’s only his left ear so I’m very thankful for that. First grade is also going much better than kindergarten so we’re happy about that. Mrs. RB40 and my mom also had some health issues as well. Hey, we’re alive and relatively healthy so we can’t complain too much.
Thanksgiving isn’t about Black Friday and Cyber Monday. Sure, if you need to buy something, it might be a good time to get it. However, we all need to put family first and be thankful we’re alive and enjoying life in a free country. Everything else is gravy.
Christmas is also a time to celebrate with loved ones. It’s not all about gifts and oversized decorations. For many families, it’s the only time they can be together each year. The gifts are nice, but spending time with extended family is even better.
The holiday season is the time to enjoy the fruits of our labor. It’s not all about spending money. Once you’ve reminded yourself of this, it’ll be easier to spend less. Every one of us can appreciate the holidays without spending a lot of money.
Set a Hard Budget
Once we’re set in the right mental state, it’s time to get down to the mechanics of how to avoid overspending. First of all, you need to set a hard budget and stick to it.
Check your bank account and figure out how much money you have and how much of that you can spend. Make a budget for all the categories of holidays spending and set an estimate for each. Lastly, sum them up and set a hard budget for overall spending. This is best done before Thanksgiving.
Here is our budget for example.
|Thanksgiving dinner||$40||We plan to roast a chicken this year and tell RB40Jr that it is a baby turkey. Side dishes shouldn’t be too expensive.||Around $30|
|Christmas dinner||$50||I’m not sure about Christmas dinner. I think $50 should cover our part of it.|
|Black Friday Shopping|
|Laser printer||$80||My printer bit the dust earlier this year. This Brother laser printer sounds like a good replacement.||$69|
|USB cables||$15||Our USB charging cables are not working well. We need to fidget around too much. I found a 4 pack USB cable on Amazon that should work well.||$13.99|
|Earbuds||$10||I caught Mrs. RB40 borrowing my earbuds and I think she should have her own pair.||$8.30|
|RB40Jr||$40||Lego sets are expensive...||$40|
|Kids||$40||My niece and nephew.||$33|
|Mrs. RB40||$70||She wants a new blender to replace her 20 year old relic that never worked all that well. I’m looking at a Ninja blender.||$99.99|
|Star Wars Episode 8!||$30||We'll go to a matinee show.|
|Road trip to CA||$200||Gas and food for 1,300 miles round trip.|
|2017 Holiday Season Budget||$600||The total is $545. I’ll give us a little leeway and round it up to $600.||So far .. $294.28|
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So our hard budget is $600 for this holiday season. I think that’s moderate as far as holiday spending goes. We could cut back if we needed to, but we’ve done well financially this year so I don’t feel too guilty about it. As long as we don’t go over $600, I’d be happy.
Of course, if you’re hard pressed financially, then you need to set a smaller budget. Check your bank account and see how much you can afford to spend this holiday season.
Track Your Spending
The next step is to track your spending. It’s not useful to set a budget if you’re not going to track it. The most foolproof way to do this is to put aside the budget in an envelope and once it’s gone, you’re done. You can even use a credit card with this system. When you buy something online, just transfer the amount from your budget envelope into your bank account.
The envelope system works well, but it’s too much manual work for us. I’ll just keep track of our spending on my trusty spread sheet. Personal Capital is also pretty helpful. I can check my credit card spending whenever I logon (almost every day) and update my budget spreadsheet accordingly.
*If you need help keeping track of your finances, try using Personal Capital to help manage your investment accounts. We have many accounts and Personal Capital shows me the big picture in just a few minutes. Whenever I log on, I can see our net worth, how our investments are doing, our spending, and more. Personal Capital is a great tool for DIY investors.
Avoid the Advertising
There’s bound to be some fantastic deals this week. However, it is best to avoid the Black Friday ads if you’re on a budget. I just saw someone waiting for Best Buy to open so they can return a huge 4K television. I don’t even know what a 4K TV is, but I bet there will be some great deals for it on Black Friday. Our old 720p TV still works and we don’t need anything new. The key here is to avoid looking at the great Black Friday deals. If I start looking, I’d be tempted to buy the much improved product. We don’t really need a new TV yet. Once our old TV stops working, then I’ll look at the ads.
Besides, if I get a 4K TV, we’d need to get a new UltraHD player, cables, AV receivers, Netflix subscription, and a host of other paraphernalia to maximize the viewing experience. I’m not quite ready for the upgrade yet. (I just looked up 4K TV on the internet…)
Bottom line, avoid going through all the ads and focus on what you really need to buy.
Choose the Right Credit Card
Earlier this week, Mrs. RB40 asked if we should go back to our cash allowance system. This system worked well for us when we needed to cap our monthly personal spending. Each of us got $100 cash per month to spend on whatever we wanted. However, we signed up for new credit cards to get the bonus and never went back to the cash system. It’s just easier to track what we spend with the credit card. We also received really great sign up bonuses and visited Hawaii and Cancun with them. Using the right credit cards can help you get some cash back and save money on travel.
You have to be vigilant, though. It can be easy to overspend when you want to fulfill the signup bonus conditions. It’s usually spending $3,000 in the first 3 months or something like that. If you’re not disciplined with money, then just stick with your regular credit cards and don’t sign up for new ones.
Cut Back on Travel If Possible
Travel is expensive during the holidays. The flight and car rental for our Bay Area visit would cost us over $1,200 for 4 passengers. That’s why I’m going to drive down instead and save $1,000. Of course, that’s not possible for many people. Flying is much more convenient and you don’t have to spend so much time on the road. You just have to do what you have to do and put it in the budget. Flying during the holidays is so stressful, though. The airport is always packed. I always hated it.
*If it snows this Christmas, we’ll just stay home and Skype instead. That’s the good thing about road trips. It’s more flexible.
Have a Great Holiday Season
I hope you’ll have a great holiday season without overspending this year. It’s very tempting because the economy is doing so well, but you need to check your bank account too. Let’s keep it modest so we don’t have to pay for it later in January. Remember – avoid those super deals on Thanksgiving and Black Friday. It’s much more fun to stay home and enjoy the holiday with family and friends than joining the frenzy at the store.
How much money are you planning to spend this holiday season? Will this year be expensive for you? Have a terrific Thanksgiving!
For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.
Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.