Communicating about family budgets during the holiday season Nov 30, 2012, 1:15 pm By Heidi Carmack Pfaffroth

Guest post by Hannah Pullham

Creating a financially secure environment during the holidays can be difficult. The holidays bring joy and happiness, sometimes along with stress and confusion.

Set budget standards with open family communication. Start by creating a list of everyone involved in your holiday gifting—family, friends, children, neighbors, co-workers. Discussing gifts with your family and setting budget standards is the first step to creating financial stability throughout the holiday season.

Figure out how much you can spend. Money for the holidays should come from your current disposable household income. Remember to consider all parts of your holiday budget: gifts for family and friends, indulgent food and drink, decorations, greeting cards and postage, travel expenses, holiday clothing and charitable contributions. Household utilities like gas and electric bills, mortgage/rent payment and car payment, should also be included in the holiday budget—considering also that utilities might go up with extra lights or houseguests—to ensure that there are no back payments in the coming month.

Set recipient expectations with children and other family members. After creating a list of people you are giving gifts to, set expectations. With children or other people you give to that may be used to certain gifts, it is appropriate to set expectations. Setting expectations can help to avoid confusion or hurt. Past years’ giving, or a feeling of need to reciprocate costly gifts, may cause high expectations. Instead of feeling worried about living up to these, be honest. Talk to children and family about your budget and what they can expect for the following holiday. When you communicate openly and set realistic expectations about gift-giving, it eliminates much of stress and worry gift-givers experience.

Set giver expectations. It is important to form a strong “no more than” approach to holiday spending—set a limit and don’t spend more than that. This will establish the importance of the budget and will motivate those involved in the budget to look for the best deals during the holiday season. A great trick to sticking to a budget is the envelope method—giving each family member their budget for gifts in cash. The cash is saved in an envelope for holiday spending and when the money is gone, spending stops. This creates a visual budget for those that have a difficult time managing their bank account or using their debit cards. It also curbs temptation to use credit cards.

Extra tips: Write your other financial obligations—mortgage payment, car payment or credit/debit balance—on a piece of paper and keep it in your wallet to remind you not to overspend; Look into ways you can earn extra cash during the holidays; Cut back on extra luxuries like movies and dining out; Stick to your list.

Open communication is one of the best tools to get the biggest bang for your buck within your household. The more you talk about expectations regarding the holiday budget, the more comfort you can take in knowing that you created the most enjoyable holiday for your family and loved ones.

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