here’s a dangerous misconception that it’s “priceless” to create a picture perfect holiday experience. The reality is “priceless” usually comes with a hefty price tag and when emotions are running high but funds are running low.
It can cause stress, resentment and even financial hardship. All of this can be avoided but it requires you putting your head before your heart so that you won’t be held hostage by holiday debt.
Like you, I really enjoy the holidays and want to share them with family and friends. But I’ve made one distinction that has changed the approach I take to the season that used to send me into a financial tail-spin.
What I know now is that if you spend what I call “emotional currency” you are often setting yourself up to be financially bankrupt after the holidays. To keep things in balance you have to be willing to look at your current financial situation (minus the rose colored glasses) and get clear about just how much you can actually afford to spend.
Once you know how much you can realistically allocate towards purchases, decorations and dinners with family and friends then you have to be prepared to do a few things if you want to stay on a steady financial track all year long.
Prioritize your expenses into two basic categories
Category #1: Necessary – These are the things you can’t do without like:
- Food, medication
- Rent or mortgage
- Gas, electric, water, phone
- Transportation
Category #2: Nice to have – These are things that make your life easier but you can go without:
- Cable or satellite
- Cell phone
- High speed internet
- Monthly memberships and subscriptions
- Eating out
Sometimes the fear of not knowing how bad things are can keep you from looking at your situation fully so that you can be in a better position to address the mess. But the long term damage of operating with blinders on can be much worse than the temporary pain of getting a handle on your finances sooner rather than later.
You will feel better about facing the holiday (and everyday) when you know rather than ignore the situation. Making choices based on facts versus what you feel will give you the power to put your priorities in place.
Generate more income
There comes a time when cutting costs is not enough, you may have to generate some extra cash to take care of bills and focus the extra funds on paying down debt. Think about what you could do to earn more money, including:
- Working overtime
- Get a part-time job or do freelance work
- Look for a network marketing opportunity that would fit your personality and lifestyle
- Sell some of your stuff at yard sales, pawn shops, flee markets or online auctions (i.e. eBay or Craigslist)
- Start a home based business tapping into your talents
- Take on a border, rent space in your home on a temporary or long-term basis
You sure up your financial foundation by not only reducing expenses but also by increasing income. You may have to go beyond your comfort zone, but it’s worth it to relieve any financial pressure you’re feeling.
Ask yourself how you can make more money. Be smart and realistic, but also get creative with what you can and are willing to do to make additional money.
Contact your creditors directly
A common reaction to debt is to ignore or avoid it. The second most common response is to look to someone else to handle it for you.
While you could choose to work with a credit counseling agency to get the debt monkey off your back, just know that you can also do it yourself. Contacting your creditors is going to be the best way for you to maintain your relationship with them now and in the future.
Calculate in advance what amount of money you can afford to make as a payment and how often you will be able to make it. Be sure to make notes of every conversation, every agreement and everyone you spoke to and when.
Work on a plan that will let you eliminate your debt by starting with the highest interest rate not just the lowest balance. If you have a $500 balance on a card that is charging you 17 percent interest and a $5,000 balance on a card that is charging you 24 percent interest you’d be best served to tackle the 24 percent first.
Even though it will take you longer to pay off you need to be as aggressive as possible to lower the amount you owe on the $5,000 to keep you from paying even more money in the future.
Don’t cancel Christmas
It may seem like there is nothing left to spend after you get a snap shot of your current financial situation. If that’s the case, it’s even more incentive to use some of the ideas offered to generate additional income, plus you can also:
- Choose a family gift that everyone can enjoy
- Shop after Christmas to get presents at big discounts
- Put a spending limit on gifts for friends and extended family members
- Draw names from a hat to determine who you will buy gifts for
- Commit to shopping with cash only so you can visualize how much you are spending
- Make a shopping list and stick to it
- Create coupons that can be “cashed in” for things that mean a lot but money can’t buy (i.e. cleaning out the garage)
Instead of stressing out about spending more than you can afford, figure out a low or no cost tradition can you start with your family and friends. Perhaps it’s playing a competitive board game for bragging rights or maybe writing and starring in your own family play that highlights the year past.
You can even throw a re-gifting party and invite other families over with the condition that they bring an item that was given to them but they no longer want. Make it fun by giving out awards for the worst gift or the gift most likely to resurface next year.
The key to enjoying the holiday’s is to make memories that will outlast any gift that you could have bought on credit only to regret it. Imagine how great you will feel when you get a better handle on your finances so that you can shop with confidence knowing you will no longer be held hostage by holiday debt.
© Sanyika Calloway Boyce, Financial Fitness Coach
