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4 Steps To Avoiding A Spending Hangover

In short, people could be facing record holiday bills with smaller paychecks. That's a recipe for a brutal financial hangover.

Avoiding the regret

How can you avoid that holiday spending hangover? Try these steps:

  1. Figure on a reduced paycheck. You can research the specifics of your tax situation or use a 5 percent ballpark estimate. Either way, figure what your paycheck would look like post-fiscal cliff.
  2. Figure out a payback plan. Figure out how much that reduced paycheck would leave you for paying off holiday bills, and figure out how much you could pay off by the end of the first quarter of next year. Your total holiday budget should not exceed that figure.
  3. Allocate your holiday budget. Take that total and decide how to spread it among the people on your holiday gift list. A tighter budget might force you to do some hard thinking about who's been naughty and who's been nice.
  4. If the cliff is avoided, roll the savings forward. After all this, what if the government makes a deal and your taxes don't go up? Then take that extra 5 percent and start saving it toward next year's holiday budget. You may find you can save enough this way to have no bills left over next January.

One of the most galling things about a hangover is knowing it could have been avoided with more sensible behavior. By taking these steps, you'll likely enter the new year with no such regrets -- at least on your finances.

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