H&R BLOCK: DOLLLARS AND SENSE

Financial health for the holidays

’Tis the season to overspend. We know we shouldn’t spend more than we have; however, we engage in some of our most self-destructive financial behaviors during the holiday season.

During the holidays, Americans will make one-third of their yearly purchases and often spend many months trying to pay off the bills.

Giving to others feels great,, but if we are spending more than we can afford we are not only hurting our financial health, we are modeling poor financial behaviors for our children. If you are at risk of spending too much money over the holidays, try the following:

1. Begin your holiday shopping with a different kind of list. List all of your beliefs about giving. Our beliefs about money, called “money scripts,” are those unconscious and often self-limiting money-related beliefs we learn early in life (typically from our own parents) that drive our financial behaviors. For example, many who overspend have money scripts like:

"Spend it while you've got it."
"I'll never have enough money, so I might as well have fun now."
"My family deserves to have nice things."
“You show your love for others by buying them gifts.”

Spend some time examining your money beliefs and where you might have received these messages. Knowing what your money scripts are and where they came from can help loosen their grip on your life and enable you to make healthy financial choices. Money scripts get passed down from parent to child, so it is important to identify and change any problematic money beliefs or they will trickle down to our own children.

2. Stop buying on credit. In fact, leave your credit cards at home. Don’t start a new year on the wrong financial foot by growing your debt several hundreds or thousands of dollars this holiday season. People spend up to 30 percent more when they use credit cards to make purchases. There is an emotional distancing that comes with a swipe of the credit card that doesn’t exist when we spend cash.

3. Make a plan. Determine what you can spend before you shop. Make a list of people you will give gifts to and how much you will spend on each. Involve your children in the budgeting process for gifts for extended family members and friends. Then go to the bank and withdraw that amount in cash and put it in envelopes to use for all of your holiday purchases. The skills your teens will learn in budgeting for the holidays are the same skills they will need to manage their money throughout the year.

4. Get creative. If you have a large family, draw names and buy for that person only. Set a price limit and stick to it. You may be surprised how relieved your family members are when they don’t have to buy multiple gifts for everyone. Also, remember the best gifts come from the heart. Encourage your family to add two or three items to their wish lists that don’t cost money. Toys are easily broken and quickly discarded, while memorable experiences can last forever. Whether or not your family is already financially burdened, set a reasonable spending limit to avoid the holiday debt hangover. When the toys are broken and you open your bills in January, you will be happy you did.

Get creative. If you have a large family, put names in a hat and have each member draw a name and buy for that person only. Set a price limit and stick to it. You may be surprised how relieved your family members are when they don't have to buy gifts for everyone. Also, remember that the best gifts come from the heart, and many cost little or no money. Encourage your family members to consider adding two or three items on their wish lists this year that don't cost money. Toys are easily broken and quickly discarded, while memorable experiences of family time can last forever. Whether or not your family is already burdened with excessive debt, set a reasonable spending limit this holiday season to avoid the holiday debt hangover. When the vacation is over, the toys are broken and you open your bills in January, you will be happy you did.