With people out of work or just trying to manage the rising cost of living in a shaky economy, Christmas spending is expected to take a hit. A recent Gallup poll found a record-high 35 percent of Americans say they will spend less on Christmas gifts this year than what they spent in 2007.
You can already hear the whining, "What about the kids? Do we tell them Santa's broke this year?"
Jeff Harring, vice president of financial planning with Raymond James, cautions his clients against emotional spending this time of year. It's like a "lack of dieting or spending in that holiday period." You may blow it here and there, but it's the year-long discipline that will keep you from ballooning debt and a ballooning waistline.
"First of all most people do not know what they can spend," he says. "We spend on what we need now, and we don't spend money on what we need later. It's backward."
He offers these tips:
Pay yourself first
Before you even talk about spending on holidays, remember that this is no time to put planning on hold. Put money in a 401(k), college account and a household savings fund before even deciding how much there is to spend. Get a piece of paper out and skip ahead to what you want in two, five or 10 years. A new house, car or college? It starts now.
Paying yourself first is the one decision, Harring cautions, that if multiplied over a lifetime, can make the difference between retiring with relative wealth or still living paycheck to paycheck.
Leave the cards home
Leave the debit card home too. Get a wad of cash.
"There is something very visceral about flipping dollar bills at the cashier," Harring said. "When you have cold hard cash creating a wad in your pocket, you hate to see the cash go away. You start to see, 'Hey, that is my money going out the door.' "
Get a notebook
Write down every meaningful expense of $5 and above and you might just hesitate to impulse shop, Harring says.
"The process of writing it down makes people more accountable. … It's kind of like the cash thing. You now have to personally sign off on it, maybe it stops you from making a really dumb purchase."
Think of the kids
While some are prone to overspend to make the kids happy, Harring worries about parents losing a teachable moment.
"They are modeling for their children. When life is good, we spend a lot. But when life is bad, we're going to keep on spending? What kind of lesson is that? It's putting your head in the sand.
"If you have an event in your life, such as a job loss, you need to model for your kids how to respond to that. Instead of spending lots of money, this year we are giving the gift of time and the other stuff will have to wait until we are able to afford them."