How to Avoid Financial Mistakes Around the Holidays

How much will the holidays cost you? This year, the average shopper spent $313.29 in just the five days from Thanksgiving to Cyber Monday. If the high costs of the holidays are already beginning to make a dent in your wallet, the California Society of CPAs (CalCPA.org) warns against making things worse with these mistakes. 

Mistake #1: Not Sticking to Your Budget

If you haven’t actually thought about how much you want to spend this year, it’s not too late to make a plan that establishes the total you will spend and how much you will allocate for each of the people on your list. Next comes the tricky part: Don’t be tempted to add to your list or go over your spending limit. Remember, a bargain on an additional present isn’t really a bargain if it breaks your budget.

Mistake #2: Omitting Some Important Costs

Holiday budgets aren’t just about presents. When making your budget, don’t forget to include the cost of travel, including flights, hotels, gas and other expenses. If you’re hosting holiday parties, consider your grocery costs and other expenses associated with entertaining.

Mistake #3: Succumbing to Wacky Presents

Inevitably, at some point during the holidays you’ll find yourself at the cash register or browsing online and you’ll notice those funny little holiday-themed items that light up or glow in the dark or play familiar holiday tunes. Don’t buy them!

Whether online or brick-and-mortar, stores at the holidays are a minefield of useless presents—and awful sweaters—that may seem funny or unique at the time but inevitably end up in somebody’s trash can by New Year’s Day. Take a deep breath, remember your budget, and your good sense, and move on.

Mistake #4: Blowing your Bonus

You’ve just found out that you’ll be getting a year-end bonus or a raise in 2019. That’s great news, but avoid celebrating by spending everything you get. It’s best to put away at least half your bonus for longer-term goals, such as lowering debt, saving for a house or other large purchase, or saving for your children’s education or your own retirement. The American Institute of CPAs’ 360 Degrees of Financial Literacy website offers tips on dealing with a financial windfall.

Similarly, don’t overdo the credit card spending just because you know you’ll be getting a raise in the new year. Once again, keeping a longer-term perspective can help you focus on how to use that money in ways that will benefit you over time.

In addition, don’t start spending any expected bonus or raise until it’s actually in your checking account. A company’s plans can change from year to year, so be sure you’re really going to get the windfall you expect.

Mistake #5: Forgetting that It Really Is the Thought that Counts

No matter how much you might be able to spend, the gift of time or thoughtfulness may end up being the most appreciated. If you are choosing to have a more frugal holiday this year, remember there are still many ways to spread the joy. Offer to do some housekeeping or home maintenance projects for a friend who’s pressed for time or for an older relative. Whip up batches of your favorite recipes as gifts for the family. Set a date to have a movie night with a friend or plan a family camping trip. You’ll find that gestures like these mean the most.

Your CPA Can Help

Seeking ways to make the most of your budget, or achieve any important financial goal? Talk to your local CPA. He or she can offer expert advice on the financial topics that matter to you and your family. Check Find a CPA to find one near you.

And visit the AICPA’s 360 Degrees of Financial Literacy website for more tips and tools to help you stay on track in the new year.

Copyright 2018 American Institute of Certified Public Accountants.

The Money Management columns are a joint effort of the AICPA and the California Society of CPAs as part of the profession’s nationwide 360 Degrees of Financial Literacy program. Listen to podcasts with more financial tips.