Okay, pumpkin spice latte season is in full gear, and we are heading into peak holiday time.
Or as I think of it: the peak credit card danger zone.
Between travel plans, parties, and gift-giving, the winter holiday season can be make-or-break for your finances. And it’s easy to lose sight of how all the one-off spending adds up until the much bigger credit card bills start arriving in late December and January and you realize you really overdid it.
This is now an even bigger problem given that the Federal Reserve just raised the interest rate that influences what credit card companies charge on unpaid balances. Before the rate hike, the average interest rate on credit card accounts being charged interest was already more than 22%.
I think an interest rate above 22% is plenty of motivation to head into the holiday season with a spending plan that won’t lead to big credit card bills.
Repeat after me: Who I am is what matters, not what I give.
Being a caring, loyal, thoughtful family member or friend is what draws people to you. It is what makes you someone who is loved and admired. Period.
Telling yourself you have to spend money you can’t afford in order to be a good relative or friend is terribly wrong. Stand tall in who you are.
True generosity requires that giving be generous to the giver as well as the recipient.
Paying for a gift that will be appreciated by someone else is not generous if you can’t afford it. A gift that causes you to pay credit card interest is not generous. Spending money on gifts that causes you to skip a month of contributing to your emergency savings fund or Roth IRA is not generous.
The value of a gift is not its price tag.
Invited to a bunch of holiday parties? Great. And it is absolutely lovely to show up with a gift for the host. But it need not be a budget buster, especially if you have multiple parties you expect to attend.
A batch of your favorite holiday cookies along with a personal note is perfection. Or bring something fun or thoughtful that is truly within your budget. That’s true generosity that works for you and them.
If you have found it hard in the past not to overspend around the holidays, maybe this is the year to try a mini-budget for what you will spend.
How much is too much? Remember that gifts are wants, not needs. New outfits for parties are wants, not needs.
As for traveling to see family: I am not going to tell you not to go. But if the trip is going to stretch your budget, please promise me you will not compound the financial strain by also bringing expensive gifts. You are the gift.
And please don’t fall into the “it’s tradition” frame of mind that makes you feel you need to keep giving gifts because that is what is expected of you. Something homemade with a lovely note can show more personal effort and thought than spending a lot of money on something.
The tradition I hope you establish is to enjoy the holidays without overspending.
What may seem okay in the midst of the holidays can cause plenty of remorse in January when the bills are due.
You don’t deserve that.
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