Financially speaking, the last three months of the year are like the last quarter of the big game. If you put together a great game plan and executed on that plan, you’re probably well on your way to victory.
You might want to relax a bit. Coast across the finish line. But unfortunately, there’s still way too much time left on the clock to relax. And the fourth quarter is usually when things get really interesting.
A lot of great budgets and financial plans are undone by the holiday season. The end of the year can be a lot of fun, but it’s also a time when we tend to let our financial guard down and make a few common mistakes that can really put our budget at risk.
We forget to prioritize
Of course we want to celebrate every holiday to the max and attend every party and send cards and gifts to everyone we know. We want to do everything (or, in some cases, we feel obligated to do everything). But you can’t.
Part of enjoying the holiday season is making peace with your limitations and maximizing the time and resources you do have available. You can’t be everywhere and you can’t be everything to everyone. So you first need to figure out what’s most important to you and be okay with letting go of some of the stuff at the bottom of the list.
We mistake generosity for thoughtfulness
The holidays generally involve some level of gift giving. You can give gifts for any number of reasons, but usually the gift is a way to say that you care about the recipient.
Where this sometimes goes wrong is when we substitute generosity for thoughtfulness. We don’t have the time or the energy or the desire to give gifts with meaning, so we replace meaning with size and expense.
The intention is still positive, but the impact on our finances can be pretty significantly negative.
We make too much food
We all know that we waste food, but it’s especially egregious during the holidays, when tables across the world are overloaded with foods that won’t be seen again for another 12 months.
We like our traditions and traditions are important, but when it comes to food there can be a lot of value in consolidation by subtraction. Uncle Bob might be upset that you aren’t making those date cookies this year, but since he’s the only one who ever ate them he’s just going to have to get over it.
We overestimate our cushion
Going back to the sports analogy, sometimes a team thinks they’re further ahead than they really are. They get passive down the stretch because they assume they can’t lose. But they can.
It’s the same with our budgets at the end of the year. If we’re working with a surplus we tend to loosen the reins a bit and not think too much about our spending. And that’s precisely how a surplus turns into a deficit.
We worry too much about what other people think
Without getting into what the “holiday spirit” is and is not supposed to be (that’s up to you), it’s safe to say that many of us feel a certain amount of external pressure during the holiday season. We see our neighbor’s decorations and want to do better. Our co-worker gives the boss a present, then we give them a bigger present. Our sister bakes a pie for the big family gathering, so we bake two.
The holidays can be a sadly self-destructive time if we spend too much time and energy worrying about what everyone else is doing. This is especially true for your finances. Put on the blinders and focus on yourself.
We compete against last year
It’s bad enough when we put ourselves into unnecessary competitions with our neighbors, friends, and family. Even worse is that we’re constantly in a competition with ourselves and what we’ve done in the past.
Thinking that you need to top yourself every year is only going to end with you overextended financially and more than a little stressed out. Treat every year as the unique set of circumstances that it is and you’re much more likely to enjoy yourself and maintain your budget at the same time.
We borrow against next year
Today is here. Tomorrow is not. This is the crux of why we borrow and spend money we don’t have. The benefit is immediate and the pain is not.
During the holidays that benefit can be caught up in all kinds of other complex emotions. We want to be happy. We want to make other people happy. So we borrow from our future selves. We get to feel good today and we can deal with the consequences next year.
Of course, next year is always closer than it appears, and in many cases we feel that pain for a long, long time. So instead of carrying debt into the new year and placing that burden on your next budget, stand firm during the holidays and only spend what you can afford to spend. If that’s not the best gift you can give yourself, it’s definitely the most financially satisfying.