Chris Muecke

With Christmas right around the corner, many of us have begun accumulating gifts and decorations so we may enjoy this time of year with our friends and family. It’s an opportunity to reflect on the many blessings in our lives, give thanks to those around us and care for others who aren’t as fortunate.

Understandably, it is very easy to get swept up in a frenzy of spending while paying little to no regard on its cumulative effects. Worse still, we often spend our money during the holidays on Wants and Wishes instead of Needs.

When left to operate within an unconstrained budget, most of us will spend our money frivolously. For example, Americans spent more than a half a billion dollars this year on Halloween costumes … for our pets.

That is why setting and sticking to an appropriate budget for your holidays is so important. Like most of us, you probably have limited funds to stretch across many needs. You will need to prioritize all those needs to ensure that you have sufficient money available.

Keep in mind that your capacities and limitations will be different from others, and therefore your spending allowances should also be different from others.

This is a tough concept for children to understand, but it’s an essential lesson we all have to learn if we want to be financially independent in our adulthood.

For example, you may remember some Christmas mornings when Santa Claus was more generous at some of your friends’ houses than he was at your own house. Did you expect a certain financial threshold of gifting that fell short?

Without proper communication, we can easily translate these actions as feeling unloved. In reality, “Santa Claus” might have been doing what was best for you in the long run.

Did your parents want to help put you through college?

Did your parents want to avoid being a burden to you in their retirement?

Do you want those same things for your children?

Sometimes what enables those moments to come to fruition are the moments when you say no.

Overspending on the holidays drains resources and restricts our abilities to accomplish things elsewhere. Our holiday spending needs to be consistent with our financial goals, our income and our recurring savings habits.

Begin by understanding what resources you have to work with and all of the tasks you would like to achieve with your holiday budget.

If you’re working with limited resources, you may need to make some tough choices. Families are always growing in size, and everyone’s tastes get more expensive with age. You may need to recalibrate how you spend your dollars to make everyone feel special.

Consider spending your money this year on traveling to see your friends and family rather than sending them gifts, for example.

When you do purchase gifts for loved ones, set a budget and stick to it.

Consistently review how you are doing on this year’s budget and make corresponding adjustments along the way. It’s always good to look back at last year’s budget, too, whenever available.

Crafting your holiday budget will allow you to see the vast sums of money you spend at this time of year and where it all goes in the end. This process will allow you to make better decisions with your money, stretch your dollars further and ensure that your spending stays within the right parameters for you.

Please consult your tax advisor for how the advice in this article pertains to your personal financial situation.

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