Black Friday marks the official beginning of the holiday shopping season. While it’s easy to get caught up in all of the sales and how many deals you can get, ask yourself these three questions to get a better idea of how much you can truly afford to spend.
What is my overall holiday spending budget?
If you don’t know how much you can afford to spend, how will you know when you’ve spent too much? Before taking advantage of the first holiday shopping deal write down all of the people you plan to buy gifts for and how much money you’re willing to spend on those gifts. Make sure the money you spend is truly disposable – it should not come from your emergency fund, it should not leave you unable to pay your bills and it should not be charged on a credit card unless you’ll be paying the card off at the end of the month.
How much debt do I currently have?
If you’re currently paying interest on credit card balances, think about how it would feel to pay them off. Wouldn’t it be great to start the near year off with a clean slate? Reduce your holiday spending budget by 10 percent and take that additional money and apply it to your debts. That way you’ll still be giving gifts to others, but you’ll also be giving a gift to yourself.
What are my financial goals for 2014?
Finally, ask yourself how your holiday spending will impact your bigger financial goals. If you’re planning to buy a house, you want to have enough money saved to not only take care of the down payment, but to handle unexpected emergencies, as well. You’ll also need money saved up for maintenance and upkeep once you’ve moved into your new home. To get the lowest interest rate possible on a mortgage loan, clear up as much debt as you can. Consider spending less on holiday gifts this season or skipping Black Friday shopping altogether and save the money instead.
We all know that this is the season of giving. The greatest gift you can give yourself this holiday season is the gift of financial security.