The Personal Finance Podcast - How to Overcome The Holiday Spending Hangover (Never Broke in January Again!)

Episode Date: December 23, 2020

Episode 33: How to Overcome The Holiday Spending Hangover (Never Broke in January Again!) In this episode we cover:  How to plan so you never overspend again  How to handle holiday debt  How to buy all your presents for free How to give more  How to Defeat the Holiday Spending Hangover  Stuff I Recommend!  M1 Finance Best Place to Invest  Personal Capital Free Wealth Management and Budget App  CIT BANK (Best Savings Account) ** Some links may be affiliate links and we earn a small commission at no extra cost to you. We only recommend products we truly believe in.  Learn more about your ad choices. Visit megaphone.fm/adchoices

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Find your advisor at IG Private Wealth.com. On this episode of the personal finance podcast, we're going to talk about how you can overcome the holiday spending hangover. What's up, everybody, and welcome to the personal finance podcast. I'm your host, Andrew, founder of dollar after dollar.com. And today we're going to talk about how you can overcome the holiday spending hangover. So you spent too much money for the holidays again, didn't you? Maybe you were engulfed in a wave of generosity, feeling like Oprah, giving everybody gifts. You get a gift.

You get a gift. Everybody gets a gift. And it was your greatest gift-giving year to date. Try to say that 10 times fast. You made it rain presents. You just threw presents all over the place to your families, your friend, your coworker. And then we can't forget the holiday party that you went to where the champagne was flowing like a river. The fine cheeses, meats, and hors d'oeuvres.

Maybe you had a nice charcutory board. And boy, oh boy, did you love your home decor for Christmas? You had to have the Santa Claus and Mrs. Santa Claus salt and pepper shakers, didn't you? But then what happens to every single year is the holiday pixie dust settles. And what most people feel is an overwhelming feeling of stress and anxiety and guilt. And now what you have to do is face your credit card statement. So you pull out your last bottle of the fine wine from your Christmas party, you pop that bad boy open, and you take a deep breath, open it up, and boy, oh boy, is the damage way worse than you thought it was.

Now listen, this happens to so many people, and it doesn't have to be like this. It doesn't have to be a situation where the holidays are something that you're just not prepared for. And there could be a variety of psychological reasons on why you overspent. Maybe you just didn't have as good of a Christmas when you were a kid, and you wanted your kids to have the best Christmas possible. Maybe you wanted to impress your friends or your family. Or maybe you just love the sound of Santa Claus is coming to town while you swipe that plastic, credit card or you get a huge rush right before you push that buy it now button on amazon because

it's so easy the adrenaline just pumps when you push that bad boy i don't know what your situation is it doesn't matter what your situation is the fact of the matter is is if you overspent you're in a pickle and you want to make sure this doesn't happen again so what i'm going to do is i'm going to show you how you can prepare for christmas for next year so this doesn't happen again because a lot of your personal finance is about making sure you're prepared to do that you're prepared for situations like this because if you overspend and you put yourself into debt or in the hole every single year for Christmas, and a lot of people do this every single year, if you put yourself in the hole every single year, you'll never be able to get ahead and you'll never be

able to build wealth. And this is a huge pain point for a lot of people. A lot of people need extra money during December. And the reason why they need that extra money is because they didn't prepare for the rest of the year. Christmas is coming no matter what. The holidays are coming no matter what. No matter what holidays you celebrate, there's going to be spending involved. And let's get this out of the way first, because gifts are fantastic. I love giving more than anything else in personal finance. We're going to have a whole episode on giving coming up. But giving is one of the best ways to utilize your money. And giving gifts is one of the best feelings in the world. So what I'm going to show you how to do is give away plenty of money and plenty of gifts. But at the same time, you're

prepared for it and you're setting yourself up to be prepared for it because you can give away a ton of money. And guess what? You don't have to kill your wallet. You don't have to destroy your wallet. You don't have to destroy your budget. You don't have to blow up your entire personal finance for the rest of year just because you want to give away money at Christmas time. So I'm going to show you a few tricks on how to get prepared for it. And I'm going to show you a hack as well because there's a bonus hack that I would utilize if you get in this situation all the time. So let's get into it. So the first thing you want to do is if you overspent during the holidays, is you just want to get real with yourself.

Listen, you made a mistake. And understanding that you made a mistake is the first step. Because if you don't understand that you made a mistake and you're just going to keep doing this over and over and over again every single year.

And how do you expect to ever build wealth for your family? How do you expect to actually get ahead in your personal finance? If you can't even handle Christmas every single year. So what I'm going to do is I'm going to show you how to handle Christmas.

But what a lot of people say to themselves is, oh, everybody overspins during Christmas It's just a time that everybody goes into the red. It's not a big deal. It's normal. Listen to me. Repeat after me. I chose the spending life.

The spending life did not choose me. Let's say that again. I chose the spending life. The spending life did not choose me. And what you have to understand is you can choose to not spend so much money. Or you can choose to plan so that you can spend the amount of money you want to every single year. If you overspent this year and you're saying to yourself, man, I overspent this. year and I still didn't get everybody gifts that I wanted to get gifts for. Well, guess what?

I'm going to show you how you could spend more money next year and still be able to give those people gifts. But first thing you have to do is you have to understand that you messed up. You messed up spending too much money during the holidays and that's fine because you know how many people do that every single year? A lot. You know how many people go through this exercise to understand that they actually did mess up? Very few. So what you want to do is become one of the few that actually understands this and you prepare for this for the rest of your life because once you learn this once, every single Christmas is going to be so smooth as you get to that time of year. If you've got debt, if you've got a credit card balance that you truly cannot pay off,

then here's what you got to do. Because debt is a flaming emergency. You need to put out that fire as quickly as possible. So that means you have to throw every extra dollar you have at that debt until it's gone. Because what the biggest mistake that most people do is when they have debt like this, they pay down small chunks every single month. And what happens is when you pay down those small chunks, you're going to have it paid off by, guess what, next Christmas. It's going to take you a year to pay that off. And then you're starting with no money at Christmas time and you're going to repeat the cycle over again.

So people just get in this cycle and they repeat it over and over and over again. You don't want to pay the minimum balance. You don't want to take on that interest. You don't want to take on the high credit card fee interest. What you want to do is pay it down as fast as possible. So if you don't have the cash, you're going to have to hustle a little bit. If there's things in your garage that you don't use anymore, sell it, throw it at the debt. If you can make a little extra money on the side, go do that and throw it at the debt.

Get rid of that debt as fast as possible because you have to stop the madness before it starts. Because if the debt is more than you can handle, you really have to hustle. You really have to do stuff that's going to allow you to not let this happen again. I remember when I needed to hire someone fast, but finding the right person quickly felt impossible. And if you've ever been there, you know how stressful this can be. That's where Indeed comes in. When it comes to hiring, Indeed is all you need. Instead of struggling to get your job post noticed, Indeed's sponsor jobs help you stand

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And then another big piece is you've got to stop spending right away. So if you're trying to get out of this debt, you've got to stop spending and start a lot of, understanding, I've got to rein this back a little bit because if I keep spending how I am now, it's only going to get worse and worse and worse. And a lot of people who get into really bad credit card debt, it starts during the holidays and they don't go and try to hustle to get rid of that debt, and then it just accumulates more and more and more. So once you stop spending, then you can determine how much damage you did and develop that plan for that. If you've done a significant amount of damage, then you're going to want to get on a budget. And if you're not on a budget already,

I recommend a budget for anybody. And there's two ways to budget. You can either have a line by line item budget, which is what I like to do, but I'm also a money nerd. Or is you can save money off the top and then spend what's left. So maybe you want to save a certain amount of money every single month. We'll save that amount of money first, then spend what is left over on your needs. Because once you have that budget in place, then you can create a plan on how fast you can pay down that debt. How fast you can pay down the debt that you accumulated over the holidays.

Understanding your budget and understanding how much money is coming in and how much extra money you have is going to allow you to create that plan. And what I would do is figure out, hey, I'm getting an extra $500 a month. I'm $3,000 in the hole. It's going to take me six months to pay this down. But what that's going to do is it's going to give you clarity. It's going to give you a focus and a place to actually pinpoint so you know exactly when that debt is going to be gone. Now, if you have a credit card with a high interest rate, what I would do is consider a balanced transfer, especially if you have a lot of debt, if you spent way too much, consider doing a balance transfer to a balanced transfer card.

What that means is, if you're paying interest, say 20, 25, 30%, some credit cards go up to 50% interest. What you can do is go to a balanced transfer card and you're going to pay zero interest for 12 to 21 months. And that's going to allow you to pay down your debt faster so that you don't have to worry about that interest rate. In addition, it's going to give you an attack plan. Interest rates are just going to put you behind on your debt paydown plan.

But if you do it this way, if you do a balance transfer to a balanced transfer credit card and you have zero percent interest, you're going to pay down that debt so much faster. And then just make sure that you execute your plan. So if you put that plan in place, make sure you're executing it because executing that plan is going to change your life forever. Because what I'm about to show you is how to prepare for next year. So let's get into how to prepare for Christmas or the holidays next year. Now what I'm about to show you is how you can prepare for Christmas for next year. Because this is how a lot of people do not think about. their spending. But if you really think about it, Christmas is going to come and you're going to

spend money at Christmas. So why not actually prepare for it? Why not actually be prepared for it? So here's what I do every single year. I'm going to explain exactly how I prepare for Christmas every single year. You go to your credit card statement or your bank statement and add up how much you spent this year. How much did you spend this year? Now add another 10% to that number. So let's say you spent $1,000. Then your number would be $1,100. We are adding a cushion with that extra 10%. That extra 10% allows you to make up for anything that you have to purchase during the holidays next year. Then divide that number by 12. So for our example, if you had $1,100, this would be about $92. Now, why are we dividing by $12? Because now what we're going to do is every single month,

we're going to save $92. What you're doing is you're taking your Christmas bill every single year, because that's what it truly is. If you think about it this way, it's a Christmas bill because you're going to spend the money and you're making it. breaking it down into monthly chunks. So you're going to start in January. In January, you're going to take $92 cash and put it in an envelope that labeled Christmas. In February, you're going to take $92 cash and you're going to put it in an envelope. In March, you're going to take $92 cash and put in an envelope. And what this is doing is this is creating your Christmas fund or your holiday fund, whatever holiday you celebrate. And by the end of the year, when you get to December, all of a sudden,

the money's just there. You don't have to stress. You don't have to worry. You don't have to about it because the money is already there. And too many people get to the end of the year and they say, I don't have enough money for Christmas presents or I don't have enough money for holiday presents. But if you do it this way and break it down into monthly chunks, you're going to get to the holidays and you're going to say the money's just there. I don't have to stress. Everybody else is stressing out financially. I don't have to stress. This may feel weird. Like if you're going through the process and you're putting $92 away into your Christmas fund in the middle of July, but you have to keep saving because this is a bill that's going to come up.

Now, if you've never had problems with Christmas before, if you've always had the money there, maybe you're a high-income earner, then you don't have to worry about it like this. But if you've had issues with Christmas and your holiday spending, then this is what you have to do. You have to break down every budget category into chunks. And if you do it this way, everything becomes easier.

You can do this with anything. You can do this. If you pay your car insurance every six months, break it down and pay it every single month to yourself. It's the same concept for every line item of your budget. But doing this for Christmas is one of the best ways to reduce your stress, reduce your anxiety, and allow you to build wealth for your family. Because if the money's already there, that means you can save more money in other areas.

And not get behind because getting behind is what kills you in your personal finance. Another hack, buy gifts throughout the year. So here's the cool thing about saving that money every single month, is you have money already there. So if you see something on sale and you know that somebody is going to love that item, You can just buy it in the middle of June. And now you're taking advantage of sales that are out there. That's the cool thing.

Maybe you know that your sister is really into fitness. And you see a nice set of kettlebells that are on sale. Well, you can go ahead, grab those kettlebells at that discounted price so that she can kettlebell swing all next year. And this is a way to save additional money on your Christmas gifts because now you can take advantage of deals as they pop up. Because as we know, a lot of things are on sales at various times of the year. TVs are on sale during the Super Bowl and during Black Friday. The best time to buy

appliances is Black Friday and springtime. There's all these things that come on sale during different times that are the peak times to buy them. And having that money being saved every single month allows you to be able to take advantage of those sales. And just think about how much more enjoyable the holidays would be if you could just walk around and be stress-free and debt-free. Because a lot of people that go into debt, the holidays give them anxiety. But imagine if you could just enjoy the holidays. Here's another hack. If you put a lot of your money and bills on credit cards, let's say you buy a lot of your groceries on credit cards, you pay the power bill on credit cards, you do all these sorts of things. What that's going to do is that you could have the

potential to accumulate credit card points. Now, another thing that a lot of people will do is they'll pay for their Christmas presents with credit card points. So this is a really cool hack that I've started to implement a little bit, especially since travel is an as frequent right now, especially as I'm recording this during during COVID-19, a lot of people aren't traveling. So what you can do is instead of using those credit card points for travel, you can use them for Christmas presents. And a lot of people who don't care about traveling can do this at the same time anyway. So what happens is you just put all your bills on a credit card, pay off that credit card weekly, biweekly, or monthly. Make sure you have a zero balance at the

end of every single month, and you're going to accumulate points. And by the end of the year, what you're going to realize is you're going to have $1,000, $2,000, $3,000 in credit card points that you could literally use to buy all of your holiday presents, pay for all your holiday party items, and literally pay $0 during the holidays every single year, just by paying your bills. Now, if you have a problem with credit cards, this strategy's not for you. If you're in debt, the strategy is not for you. But if you've shown that you're responsible with credit cards, this is a great way to be able to literally buy Christmas presents for free, especially if you don't want to use those credit

card points for travel. And we're going to have a whole episode on how you can travel hack, meaning how you can do this strategy with travel and be able to literally travel the world for free. And I'm going to show you exactly how we do it. And it's an extremely cool hack. But if you don't care about travel or if you're just not going to travel for a while, then this is a great strategy for you because it allows you to get through the holidays and not have to spend any money at all. So just think about it this way. How much more enjoyable would the holidays be if you walked away debt-free? The holidays are stressful enough without having to worry about money.

So next year, how about you just walk into January with a smile on your face because you gave, you saw, you conquered without a trace of debt in sight? This holiday debt cycle doesn't have to control you anymore because you're ready. And all you have to do is implement these strategies. So if you over spent this year, so what? forgive yourself, pay down that debt, hustle, work hard to pay down that debt. And guess what? Next year is going to be a much better year. And that's all because the action you took this year to change your life forever. Because getting in the hole every single year will put you behind

your personal finance. But if you take this action step and do this year over year over a year, you're always going to be ahead come January. Thank you guys so much for listening. And if this is your first time listening, consider subscribing so you never miss an episode. and share this episode with a friend. And don't forget to leave a rating and review on iTunes as well, because our goal is to bring as much value to you as possible. And we're trying to spread this message that money can buy freedom. That's what money is there to do, is to buy more freedom.

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