How to make a holiday budget and stick to it

When the holidays roll around, you may be tempted to splurge on the perfect gift, go wild with decorations and cash in on big sales. But is it worth starting the New Year at a financial low?

"While you certainly enjoy hosting family gatherings and giving presents to your loved ones, you'll find these things even more pleasurable if they don't add a lot more weight to your debt load," says Charlotte Matthews, a financial adviser with Edward Jones in Cape Girardeau. Stick to a budget so you won't have to dip into your long-term investments to pay for short-term needs like gifts and parties, she says, because that's never a good move.

Matthews looks to financial author and speaker Dave Ramsey for common-sense money management tips. In his February 2010 article on holiday shopping, he emphasizes research, budgeting and a cash-only policy:

-- Before you hit the mall, look for online shopping deals and coupons. Visit the websites of stores you want to visit and compare sales and prices.

-- From there, you must budget to stay within your means. Keep it simple with the gifts. Remember, once the holidays are over, you'll still have bills to pay in January.

-- Withdraw enough cash to cover your budgeted items, and leave the plastic at home. When the cash is gone, you're done shopping -- no impulse purchases, no overspending.

And while you're in the spirit of budgeting, now is the time to set up a Christmas Club account for next year, says Julie Duenne, lobby services manager at First Missouri State Bank in Cape Girardeau.

"It is basically a savings account and you determine how much you want to deposit and how often," she explains. Users can make deposits themselves or set up an automatic electronic transfer from their savings account. The difference between a Christmas Club account and a regular savings account is that withdrawals are restricted during the year, so you won't be tempted to spend the funds. The balance of the account is paid out in the form of a check in October, says Duenne.

"You don't have to put in a great deal, 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," says Matthews. "When next year's holiday season rolls around, you might be pleasantly surprised by how much you've accumulated."