Sharpen Money Management Skills in Last Quarter

The fall months are a block of holidays. Spending and debt concerns are also sprinkled into the festivities. The final quarter of the year is an ideal time to assess your financial health and make strategic decisions for the future. This includes creating a holiday budget, maximizing savings, and addressing debts. 

Before looking forward, take a moment to look back at your finances over the past year and analyze your spending. Compare your actual spending to your budget over the last nine to 12 months. Note any areas where you overspent or under-saved.

Determine if you met your savings goals for the year. This includes your emergency fund, retirement accounts, and other savings goals. You can adjust for unexpected spending and account for any major changes to your income or expenses this year. The end of the year is the perfect time to adjust your budget to reflect. 

Maximize savings and pay down debt

• Ramp up retirement contributions: Try to max out your 401(k) or IRA contributions before December 31, if possible. This can lower your taxable income for the year and boost your retirement savings.
• Spend Flexible Spending Account (FSA) funds: Several FSA plans have a “use it or lose it” policy, so be sure to use any remaining funds on eligible medical expenses before the year’s end.
• Boost your emergency fund: If you have extra cash from bonuses or a less-than-expected holiday budget, allocate those funds to your emergency savings to meet your target.
• Prioritize high-interest debt: Use any extra income, such as year-end bonuses, to make extra payments on high-interest debt like credit cards. This saves you money on interest payments over time. 

Prepare to Manage Holiday Spending

Holiday expenses can strain budgets, and many consumers overspend. Reports indicate that around seven out of 10 households exceed their holiday budgets. According to the National Retail Federation, Americans anticipated holiday spending for gifts and other related items is projected to be around $902 per person this holiday season.

Holiday expenses can quickly derail a budget if not carefully planned. Here are four suggestions you can use to manage your money effectively: 

• Create a realistic holiday budget. Before you start shopping, determine how much you can realistically afford to spend on the holidays without taking on new debt. Use last year as a guide and review your receipts and credit card statements from the previous holiday season to get an idea of what you spent. This provides a reality check and helps you set a more accurate budget.
• Break down your expenses: Allocate your total holiday budget into specific categories beyond just gifts. Common categories include gifts, holiday entertainment, travel expenses, decorations, holiday cards and postage, and charitable donations. 
• Stick to your budget. Make a gift list (and check it twice). Write down a list of everyone you are buying for and set a spending limit for each person. Stick to this list to curb impulse buying.
• Use cash for spending. To avoid overspending on credit, consider withdrawing cash for your discretionary holiday budget. This makes spending more tangible and helps you stay within your limit.

You can wisely manage your money and still enjoy the holiday months by focusing on proactive planning and mindful spending. In addition, remember that holiday traditions are not all based on spending. Look for ways to invest in old and new traditions with your family that are free, but still priceless.