Photo credit: Cameron Powell
It's the most wonderful time of year — as those festive lyrics state — with memories to cherish forever. The holidays are just around the corner, which means fun, food, family...and finances. When it comes to holiday spending, it can also be a downright stressful time of year.
Financial expert and mother Rachel Cruze author of Live Your Life Not Theirs, understands how, and why, parents feel financially burdened around Christmas. The Ramsey Solutions team member shares some practical advice on how families can avoid overspending.
"If you try to financially 'Keep up with the Joneses' your whole life, you're going to end up broke," says Cruze. "The comparison game you'll never win. It you worry about what others are giving, it will steal the joy out of your holiday season, and also your paycheck."
According to Cruze, daughter of budgeting guru Dave Ramsey, the best way to begin saving money in the new year is to look at all your expenses this month — December — and all of your needs. "Examine everything you have to spend money on, not including the holidays, and make sure after all that is covered. If there is any money left, say, 'This is the portion we want to spend on gifts.' Let your financial situation dictate your budget, not what everyone's wants are."
Use Web sites like Pinterest to find ideas for inexpensive hostess gifts. "There are many little, simple trinkets out there that make great gifts. You can spend $15 on a candle and Williams-Sonoma spatula, and there's your gift to someone that they can, and will, really use."
Cruze advises parents to just be honest with kids about holiday spending if times are tough. "Communicating with your kids is key. Set expectations and say, 'Hey, our Christmas is still going to be fun this year, you're still going to get a gift or two,' but explain why you don't have the money to do X, Y, Z and this is what is best for the family — especially if they're of the age of understanding."
"Remember," says Cruze, "you can get ten gifts at the dollar store, young kids probably won't know the difference, and no, you're not a bad parent for doing that. Turn off your cell phones, and just spend time with your kids. That's what they'll remember."
Now, if your child has a late December birthday, gift giving can get complicated around the holidays. "Your budget is going to be the same. If a birthday takes away a little money from Christmas, so be it, because you don't want to take a birthday away from a child just because they were born in December. Your Christmas and birthday budget are going to just be one." To make December babies feel special, she recommends wrapping some presents in 'Happy Birthday' paper and others in holiday paper.
Here's her advice for kids who want to earn money: Create a chore chart, and pay your kids weekly on the chores they complete, because in doing so, there are so many teachable moments. Label three envelopes: Giving, Saving, and Spending
"Once kids put their money in each of those envelopes, you're teaching them how to be intentional with where their money's going and that's what budgeting is," says Cruze. "When they're doing this with money they earned themselves, they certainly give, save, and spend differently." In her personal blog, she recalls what her parents taught her and her siblings about earning: "You work, you get paid. You don't work, you don't get paid. Like in the real world."
Saving also delays instant gratification. "The debt industry loves instant gratification: 'You can have anything you want, you just have to go into debt for it.' Well, saving delays that. It shows patience and character-building opportunities, which is something I learned as a kid. There's so much wisdom and life lessons in saving. Kids will feel that ownership pride and take care of things better when they saved up for it. Saving teaches children responsibility, which they carry into adulthood."
Cruze recommends her dad's book series Junior's Adventures, which explains to kids the value of money. "I want to teach my kids to be other-centered, as opposed to self-centered, and it can begin with money," says Cruze, who has a young daughter. "I do believe selfless people prosper and have better quality relationships and a better quality of life."
Additionally, she advises families on New Year's Day, no matter where you are financially, "to do a budget, on paper, your computer, or your phone. You need to see the numbers visually. Your goal is to take your income for January, minus all your expenses, and have it equal zero." So, every dollar that's coming in in January is designated to a category.
Now, within that budget, put "Giving" at the top, "Saving" second, and then "Expenses," such as your bills and food, rent, mortgage. That's the plan you live by. "It's going to be tough, especially if this is your first time doing a written budget like this. It may take you about three months to get the hang of it." Realize that it won't be perfect in January, but really try to stick to that zero-based budget. Adhere to this in January, and February will be easier, March will be easier, "and before you know it, a habit will be part of your life," says Cruze.
"So if your food category is getting high that month, either you cut out eating out towards the end of January, or adjust that food category up a little so then you have to lower another category," she adds.
Overall, Cruze wants families to change their views on budgeting. "It doesn't limit your freedom, it gives you permission to spend money. Rethink the way you look at your budget; it gives you freedom to spend without guilt or questioning."
Photo credit: Cameron Powell