Holiday and Year-End Money Mistakes to Avoid

Being around family and friends during the holiday season can empty your wallet. It’s easy to get caught up in the moment and spend more than intended. Decorating your home, purchasing gifts, and hosting parties can result in a large post-holiday bill.

Although enjoying the holiday season is important, managing your finances helps you avoid starting the new year with regrets. Planning and awareness can help you focus on your financial goals rather than overindulge in holiday cheer.

The following are holiday and year-end money mistakes to avoid.

Not Maintaining a Spending Plan

Lack of adherence to a holiday spending plan can derail the progress you made toward your financial goals throughout the year. You could get caught up in the holiday spirit, spend too much, and not realize how quickly everything adds up.

Extra presents and last-minute dinners can cause financial strain. Overspending during the holidays means less money for your emergency fund, vacations, retirement, and other objectives.

Developing a holiday spending plan is essential for staying on track with your financial goals:

• List your essential holiday expenses, including decorations, gifts, groceries, and travel.

• If you’re hosting family gatherings, plan for larger grocery bills, extra utilities, and other expenses, such as taking your guests to local attractions.

• Budget for unexpected expenses, such as last-minute guests.

Spending Due to Peer Pressure

Seeing what your family, friends, and coworkers are doing for the holidays can encourage you to match or outdo their activities. You could be tempted to purchase more expensive gifts for your Secret Santa or host bigger celebrations than your budget allows. However, keeping up with others can damage your financial standing.

Emotions and unresolved family dynamics can impact your desire to overspend during the holiday season. For instance, you might host lavish parties or give costly gifts to appear successful. However, these activities detract from your financial goals.

The financial burden you carry into the new year will be more impactful than the momentary satisfaction you gain from impressing others. Therefore, focus on spending within your limits so you can fund other areas of your lifestyle throughout the year.

Indulging in Impulsive Shopping

You might be tempted to buy more gifts because they are on sale. However, you might end up spending more than planned on unnecessary items that lie around unused.

To avoid overspending, create and stick to a list of essential holiday items only. Avoid shopping at the last minute, so you have time to compare prices and purchase gifts without increasing your expenses.  

Financially Overextending Yourself

Although the holiday season encourages generosity, avoid giving more money than you can afford to spend. For instance, you might want to contribute to charity or sponsor community events. Engaging in these activities is encouraged, as long as you maintain reasonable boundaries.

Donating more money than you can afford strains your finances. Sponsoring multiple community events reduces your budget for other holiday spending.

If you decide to donate funds, maintain strict limits. Otherwise, consider volunteering with a local nonprofit organization or donating items to charity.

Overusing Credit Cards

Treating yourself and your loved ones during the holidays is normal. However, you must monitor your spending and adhere to your budget to avoid overusing your credit card.

Although it’s easy to swipe your credit card and pay for purchases later, be mindful of your limits. You must pay your balance in full and on time to avoid late fees and interest charges. Carrying a balance sets you up for financial stress in the new year.

Not Reviewing Your Finances After the Holidays

Since you likely incur unexpected expenses during holiday festivities, review your finances afterward. Understanding your financial situation enables you to create a spending plan for the new year.

Go through your bank statements, credit card bills, holiday receipts, and other financial records to determine how much you spent compared to your budget. Knowing your financial picture enables you to identify potential overspending and adjust accordingly.

Develop a recovery plan if your holiday spending exceeded your budget:

• Adjust your monthly budget for a few months to pay down holiday-related debt or replenish your savings.

• Review your credit card statements to ensure you made the recorded purchases, pay the balances on time, and avoid late fees and interest.

• If you can’t pay off your credit cards, make the minimum payments to avoid negatively impacting your credit scores.

• Mark your credit card repayment deadlines on your calendar to minimize the interest payments.

*This information is for educational purposes only.