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Between the expensive gifts, festive light-up sweaters and fancy dinner parties, it’s likely you went a little over budget during the holidays. But that doesn’t mean it’s time to panic.
“Don’t get discouraged,” says Howard R. Pressman, a certified financial planner and partner of Egan, Berger & Weiner LLC in Virginia. “Everybody, it seems, has kind of fallen off the wagon from time to time, and staying positive and keeping the goal in mind is going to be very important.”
Here are five ways to do just that — and get your budget back on track.
1. Know where you are
Look at those post-holiday credit card statements, while also considering your usual monthly bills like rent and utility payments.
“ Staying positive and keeping the goal in mind is going to be very important.”Howard R. Pressman, certified financial planner
“You want to make sure that you make at least the minimum payments on all of the credit cards, and then if there’s extra money, then you want to try to allocate that to the higher-rate credit cards,” Pressman says.
Here’s a benchmark that can help: NerdWallet recommends the 50/30/20 budget. Earmark 50% of your monthly take-home income to needs, 30% to wants and 20% to savings and debt repayment. If your debt has increased, you’ll want to dip into your wants category to tackle it faster. Budget spreadsheets and templates can point you in the right direction.
2. Limit your spending
While you’re paying down your holiday spending, put your credit card away, Pressman advises. Stick to carrying cash, at least until you’re back on plan. He says it’s tougher to part with cash, so you may be less likely to overspend than if you used plastic.
And try to restrict frivolous post-holiday shopping, recommends Marcy Keckler, vice president of Financial Advice Strategy and CFP at Ameriprise Financial. “Sometimes retailers will take things that they have left and they will mark them down even further to the point where it feels really attractive,” she says.
In other words, if you don’t really need another clearance Christmas tree, skip it for now.
3. Redeem and return
You may not be shopping as much in January, but the shopping you did over the holidays could pay off, according to Keckler. If you used a cash-back card, she recommends redeeming points or miles you accumulated. For instance, redeeming points for gift cards can “function in a similar way to cash in your day-to-day spending,” she says.
Additionally, return or exchange any gifts or purchases you don’t intend to keep. Let them sit too long and you could miss the return window — and lose out on money.
4. Give yourself an allowance
But it’s not realistic to eliminate all spending, so be purposeful about the amount you do spend.
“It’s not realistic to eliminate all spending, so be purposeful about the amount you do spend.”
Shane Sullivan, CFP, likes to call spending money an “allowance” instead of a “budget.” He advises determining a set amount of money you can afford to spend on fun stuff each month. Then, create one checking account for bills and a separate account for discretionary spending money. For spouses, create a separate one for each person. Use the discretionary funds on whatever you’d like, but draw only from the predetermined amount.
“Each receives the same allowance once a week so there is no more critical concerns about his golf or her brunch breaking the budget,” Sullivan said in an email.
5. Make it a challenge
If you’re still looking for a way to make saving easier, set a challenge to keep yourself motivated, recommends Barbara O'Neill, CFP, a distinguished professor at Rutgers University’s cooperative extension in New Jersey.
For example, O’Neill says one method is to make a weekly deposit for 52 weeks. Each week, save the same amount of money as the number of the week ($1 in week one, $2 in week two and so forth). After 52 weeks, you’ll have saved $1,378.
So don’t look back at 2019 with dismay; anticipate 2020 as the year you get your budget back under control.