Plan ahead: 5 ways to avoid budget meltdown

By MP Dunleavey

In the weeks leading up to the holidays, there's always a blizzard of advice about how to stick to a budget, avoid overspending and survive the temptation of all those "50% off" sales.

Unfortunately, none of it seems to stick. According to a telephone survey by the Consumer Federation of America and the Credit Union National Association in November, 33% of people said they were already worried about paying off their holiday credit card bills -- up from 25% last year.

I have a better idea about how to control holiday spending: Start strategizing now, while the memories of all your recent financial fumbles are still fresh.

Hindsight is 20/20, as they say, and that's especially true when those last-quarter credit card bills arrive. And when you discover 18 crumpled ATM receipts for cash withdrawals that equal the GDP of Sweden.

Rather than wonder (or weep) over where all your money went, use the January lull to reflect on what, exactly, were the factors that sparked your end-of-year fiscal breakdown. And plan to do better next year.

Yeah, I speak from experience

This past holiday season, my husband and I thought we had our spending plan down to an ice-cold science.

My side of the family had agreed to rent a vacation house together rather than exchange gifts. His family does only a Secret Santa for the couples and small gifts for the six kids.

Ergo, we barely had to set foot in a store, and we were following all the standard-issue rules for maintaining financial sanity:

• We had a list.
• We checked it twice.
• We planned in advance what we would spend on gifts and for our share of the vacation rental.
• We had set aside the cash so we wouldn't turn to plastic.
• THERE WAS NO WAY WE COULD FAIL!

The best-laid plans . . .

So what went wrong?

As I found myself dashing through the mall on Dec. 23 contemplating a $100 gift for my husband, books for my in-laws and buying umpteen holiday cards, despite all resolutions to the contrary, I marveled at what a slippery slope holiday spending could be.

I'm still unraveling the tangled web of good intentions, mad impulses, family dynamics, marketing, tradition and all those sparkly lights that caused me to spend $200 to $300 more than we had planned.

Each person has his or her own set of trip-wire issues that can cause a budget meltdown during the holidays. Here are the lessons I learned during Season o' Spending 2006, along with some hard-won wisdom from the Women in Red. May these thoughts inspire us all in the 11 months ahead.

1. Expect those unexpected expenses.

You'd think that I would have figured this out already. Just as the world famous "60% solution" spending plan builds in 10% for short-term surprise expenditures, I should have added that much more to our holiday budget for all those sudden expenses that crop up, from Scotch tape to extra postage to replacing the batteries in your digital camera 25 times.

2. Feel the love, but don't spend the cash.

With not only Christmas on her spending agenda, but her 4-year-old daughter's birthday in late December, Women in Red member Beth found herself going hundreds of dollars over budget. And who could blame her?

When your little one lets you know at the last minute that she really, really, really wants the same electronic gidgymawhatzit that her best friend has -- PUH-LEEEZ -- are you going to say no? "I ended up driving to the mall at 10 o'clock at night," Beth confesses.

The same thing happened to me in Old Navy. I spotted an inexpensive pair of pajamas I knew my dad really needed (despite the fact that we were not exchanging gifts, right?). So did I buy them? No. I bought two of them!

3. The food factor.

The folks who track the core Consumer Price Index leave out the cost of food and energy -- but the rest of us should know better, especially during the holidays.

"You really do spend more on groceries," says Virgina Perre, a paralegal in Poughkeepsie, N.Y. "You have people coming in, so you have to have lots of snacky, entertaining food -- or you're going somewhere and you have to bring snacky, entertaining food."

Next year, savvy spenders, be braced for a fairly high consumption tax, including -- and especially -- the perennial box of candy or bottle of bubbly that a last-minute invitation always requires.

4. Quid pro quo -- whoa!

It's one of those holiday dynamics no one likes to discuss: the preoccupation with giving as good as you get. Call it competition, etiquette or quid pro quo -- no one likes to be caught short.

Case in point: All the couples on my husband's side of the family had swapped names and agreed to do a modest Secret Santa gift exchange, as I mentioned.

At the last minute, my husband and I ramped up what we gave to his brother and wife -- from "gift" to "gifts" -- mainly because I didn't want our presents to look paltry next to theirs, even though I had no idea what they were giving us. How dumb -- and expensive -- was that?

Lesson: Don't try to keep up with other givers, especially when you have no clue what they are giving.

5. Dodge the guilt bullet.

Kate Hanley, creator of MsMindbody.com, may have built a career promoting sanity and serenity, but like so many people, she finds that guilt is a budget-buster.

"My family always says, 'Just little gifts this year' -- and the next thing I know someone is asking for a flat-screen TV," Hanley says. "So even though I want to buy small, thoughtful gifts, I end up thinking about the previous year's extravaganza and buying lots of stuff at the last minute so I won't look like a grinch."

I know what she means: Until I began my holiday soul-searching, I don't think I realized what a big spending trigger guilt can be in my own life. For example: the need to reciprocate the unexpected gift you get from someone you didn't even think to get a gift for.

"Two of my work colleagues gave me presents on the day before the holiday weekend -- and I didn't have a prayer of reciprocating," wrote one reader on the message boards.

Naturally, she planned to return to work with gifts for both, but the time lag proved the perfect antidote: "By the time I got back to work, the guilt had subsided and I didn't feel the need to reciprocate any more -- and I saved a bunch of money!"

As with many of life's financial lessons, I'm sure the revelations will keep coming as I reflect upon the purchases of Christmas Past.

If you have regrets and remedies of your own, I hope you'll share them on the WIR message board, so we can all enjoy an even happier holiday season next year, financially and otherwise.

Editor's note: Join columnist MP Dunleavey and a group of women as they seek to strip away the myths around money, liberate themselves from debt and find financial sanity. Follow the ongoing quest of the Women in Red every other Wednesday in Dunleavey's column on MSN Money.