Q. Last holiday season, my family spent more money than intended; do you have advice to create and keep a holiday budget?
A. Unless you are among a select group of people, sitting down and creating a budget does not sound like very much holiday fun. Nevertheless, in tough economic times, the Better Business Bureau recommends that mapping out your spending in November will help ease the strain of a financial holiday hangover in January.
Although retailers are anticipating an increase in holiday spending over last year, that doesn't mean you have to spend more. According to the National Retail Federation, "American shoppers will spend just under $750 on average on their holiday purchases this year, with a record percentage of shoppers buying online."
While it is not the most festive way to spend an evening, sit yourself down and crunch the numbers because tough economic times mean that you literally cannot afford to spend with abandon. Building a budget and sticking to it over the holidays will keep away a painful financial holiday hangover.
BBB recommends the following five steps:
* Step One: Consider your income. The first step is to measure how much money is coming in. Add up your monthly salary along with your spouse's and any child support payments, dividends or interest payments and other sources of income.
* Step Two: Add up regular monthly expenses. Adding up expenses is usually harder than determining your income because there are so many more factors to consider. Start with your rent or mortgage, utilities and credit card payments. Also factor in other expenses for gas and car maintenance, health care and groceries. A full list of monthly expenses to consider is available at www.bbb.org/us/article/tips- on-how-to-develop-a-working-budget-6101.
* Step Three: Estimate extra holiday expenses. A lot of little purchases have a way of adding up over the holidays and it is important to consider all of the expenses for the season including:
1. Gifts. Make an itemized list of everyone you want to buy presents for and estimate how much you are willing to spend for each. This includes presents for family, friends and co-workers. Also consider the cost for holiday cards and postage.
2. Entertaining. Entertaining is big over the holidays. Think about who you will be having over and also budget for any food or beverages you might need to bring to someone else's party. Also consider the costs for eating out and going to the movies -- both popular expenses over the holidays.
3. Decorations. Take stock of what you already own and then consider any additional spending you might need to make for a tree, lights, ornaments, wrapping paper, etc.
4. Travel. If you are heading out of town for the holidays, consider the cost of travel including any car maintenance or pet boarding if applicable.
5. Charitable Donations. The holidays are a time of giving, so budget in how much you plan on donating to a worthy cause. You can learn more about being a savvy donor from the BBB Wise Giving Alliance at www.bbb.org/charity.
* Step Four: Revisit, evaluate and revise your budget along the way. Once you have added up your income and expenses, it is time to compare. If more is going out than coming in, it is time to go back over your budget and pare down expenses. Consider giving fewer gifts or less expensive ways of entertaining. Last year's decorations are also probably just fine.
Once you have balanced your budget, revisit it frequently over the holidays to make sure you are sticking to it. You might find that you over estimated in some categories and underestimated in others.
* Step Five: Reward yourself. Work into your budget a small reward that you can earn if you meet your goals. If you do not meet your goals, you can guess where that money is going instead: Paying off your credit card bill in January.
Get answers to your questions each Friday from Jim Winsett, president and CEO of the Better Business Bureau Inc., which serves Southeast Tennessee and Northwest Georgia. Submit questions to his attention by writing to Business Editor Dave Flessner, Chattanooga Times Free Press, P.O. Box 1447, Chattanooga, TN, 37401-1447, or by e-mailing him at dflessner@ timesfreepress.com.