Avoid Holiday Overspending: Top Tips From Finance Expert Alexa von Tobel

overspending on holidaysBetween shopping for gifts, increased grocery bills for special holiday meals, and money spent on travel and entertainment, there is no doubt that December is an expensive month. The average American family plans to spend over $800 this Christmas season, but many will find that they have a tough time sticking to their budget this time of year.

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We caught up with CEO of award-winning personal finance website LearnVest, Alexa von Tobel, to discuss why it can be so challenging to stay on track financially during the holidays -- and how we can all avoid finding ourselves in a bind with our bank accounts come the new year.

Why do you think people overspend around the holidays?
It seems that opportunities to veer off budget are everywhere you look during the holiday season. During this time of year, we are constantly bombarded with different offers and gift-giving guides -- all delivered along with holiday cheer and familiar songs that put us in a nostalgic frame of mind. It’s difficult not to get caught up in the idea that the holidays are a time for indulgence. Plus, because the holidays come at the end of the year, we often forget that overspending in December can have negative effects that linger long into the following year.

What are tips or tricks to avoid overspending?
First, and most importantly, approach the holiday season with a plan! Once you figure out who you're getting gifts for, try creating a budget for each person. To stick to those numbers, you can even set aside each amount in cash, in envelopes, so you won't be tempted to go over.

Using credit cards without a plan in place can be a dangerous move: The average holiday consumer plans to pay off holiday bills in three months, when in reality it takes more like six months.

Instead of going it alone, you can also try to enlist friends and family in your effort to be conscientiousness about overspending. For example, perhaps you organize a Secret Santa for a gift exchange and put a price limit on gifts.

More from The Stir: How Much Moms Really Spend on Kids' Christmas Gifts

What are the most common money mistakes people make in December?
... not having a plan and not sticking to their budgets. When you set a $20 gift budget for someone, but then find a gift that seems perfect for $40, it might not seem like that much of a difference. But those little instances of overspending can really add up. This is one of the most important times of the year to take a daily money minute, and check in with your spending to make sure you're on track. I recommend doing this on a tool like LearnVest, where you can link all of your accounts in one spot and make sure there are no fraudulent transactions.

What is the one thing you think everyone should definitely do when it comes to holiday spending?
Plan ahead. The good news about the holidays is that we know they're coming well in advance! Ideally, before the holidays hit, you would have set up a separate savings account for holiday spending by tucking some money away each month in anticipation of the higher amounts of spending that usually come in December. Saving for these purchases far in advance will better equip you to make good decisions when the time comes.

 

Image via iStock.com/YinYang

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