As you know, the holiday season can be joyous, hectic, celebratory — and expensive. And while you certainly enjoy hosting family gatherings and giving presents to your loved ones, you'll find these things even more pleasurable if they don't add a lot more weight to your debt load. And that's why you'll want to follow some smart money-management techniques over the next few weeks.
To begin with, try to establish realistic budgets for both your entertaining and your gift giving. When you host family and friends, don't go overboard on your expenditures. Your guests will still appreciate your efforts, which, with a little creativity, can create a welcoming and fun experience for everyone. As a guiding principal, keep in mind these words attributed to Johann Wolfgang von Goethe, the famous German poet and philosopher: "What you can do without, do without." Set a budget and stick to it.
And the same rule applies to your gifting. You don't need to find the most expensive presents or overwhelm recipients with the sheer volume of your gifts. This is especially true if you, like so many people, have been affected by the tough economy. Everyone you know will understand that gifts don't have to be lavish to be meaningful.
Furthermore, by sticking to a budget, you won't be tempted to dip into your long-term investments to pay for fabulous parties or mountains of gifts. It's never a good idea to tap long-term investments for short-term needs, but it can be especially bad when your investment prices are down, as they may well be this year.
So, if you want to stick to a budget but you don't want to raid your investments, how can you pay for your holiday season expenses? If you can spread out your purchases, you may be able to pay for them from your normal cash flow. But if that's not possible, you might want to consider "plastic" — your credit card. Using your credit card does not, by itself, need to amount to a financial setback, especially if you've chosen a card that offers favorable terms and you've already shown the discipline not to over-use that card. Just try to minimize your credit card usage over the holidays and pay off your card as soon as you can.