Manage Finances Carefully This Holiday Season

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As you know, the holiday season can be joyous, hectic, celebratory — and expensive.

And while hosting family gatherings and giving presents to loved ones can be fulfilling, these things are even better when they don’t add more debt.

Follow these smart money-management techniques over the next few weeks to keep your debt in check.

To begin with, establish realistic budgets for both entertaining and gift giving.

When hosting family and friends, don’t go overboard on expenditures.

Guests will still appreciate your efforts, which, with a little creativity, can create a welcoming and fun experience for everyone.

As a guiding principle, keep in mind these words from Johann Wolfgang von Goethe, a German poet and philosopher: “What you can do without, do without.”

Set a budget and stick to it.

And the same rule applies to gifting.

You don’t need to find the most expensive presents, or overwhelm recipients with the sheer volume of gifts.

This is especially true if you, like so many people, have been affected by the tough economy. Everyone should understand that gifts don’t have to be lavish to be meaningful.

Furthermore, by sticking to a budget, you won’t be tempted to dip into your long-term investments to pay for parties or mountains of gifts.

It’s never a good idea to tap into long-term investments for short-term needs, but can be especially bad when investment prices are down, as they may well be this year.

So, if you want to stick to a budget, but you don’t want to raid your investments, how can you pay for your holiday season expenses?

If you can spread out your purchases, you may be able to pay for them from your normal cash flow.

But if that’s not possible, you might want to consider credit cards.

Using credit cards does not, by itself, need to amount to a financial setback, especially if you’ve chosen a card that offers favorable terms and you’ve already shown the discipline not to over-use that card.

Just try to minimize credit card usage over the holidays and pay off the card as soon as possible.

Of course, you can make your holiday season much easier, financially speaking, if you’ve set up a holiday fund to cover your various expenses.

While it’s too late to set up such a fund this year, why not get an early start on the 2012 holiday season?

All you need to do is put away some money each month into an accessible account, separate from your everyday accounts.

You don’t have to put in a lot, but you do need to be consistent, which is why you may want to have the money moved automatically, once a month, from your checking or savings account to your holiday fund.

When next year’s holiday season rolls around, you might be pleasantly surprised by how much you’ve accumulated.

But for now, following some common-sense money management practices can help you get through the holiday season in financial shape — and that type of result can get your new year off to a positive start.

Scott Flake is a licensed financial adviser with the firm of Edward Jones. He hosts regular investment discussions. For more information, call his office at (928) 468-1470. This article was written by Edward Jones for use by your local Edward Jones financial adviser.

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