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Monday, 7 December 2015

Three Ways to Curb Holiday Spending

Ah, the holiday season. Time to get together, celebrate with family and make questionable life choices. Many of us are drawing down emergency funds, or even raiding retirement accounts, to pay holiday bills.

While every family's financial situation is unique, there are some tips everyone can use to keep out of spending trouble.

Strict parameters
The typical American household spends around 1 percent of pretax income on holiday shopping, according to Hersh Shefrin, a professor and behavioral economist at Santa Clara University. Low-income families are slightly more than that, at 1.5 percent, and high-income families slightly less, at 0.5 percent. Stick to those guidelines to make sure your purchases are not spinning out of control. Start your holidays shopping early to avoid overspending and the stress of last-minute purchases. Don’t forget about yourself, something small and meaningful which you earn at the end of the holiday season, but only if you stick to your budget.

Maintain discipline
Spending with discipline means fewer family arguments. Remember that the most thoughtful presents usually do not come with a big price tag: Hand-make a photo album, for instance, or put together a genealogy tree.

Another idea: Offer family members a book of certificates they can cash in to do favorite activities together. After all, kids value your time most of all, even if they are too cool to say so.

Add accountability
Form a united front with your partner to keep you both from overspending. After all, the less you spend on holiday gifts, the more you will have to fund other key goals like college savings, family vacations, and retirement accounts.

You can also use peer pressure to your advantage. Make it public, so you cannot backtrack on your savings goals. Tell someone whose respect you crave what you plan to do, and ask them to check in with you at the end to see if you lived within your budget.

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