Black Friday And.....

Happy Thanksgiving! This is the one day each year that we "officially" take time to remember all the things in our life for which we are thankful (although we should remember that more often!). After you push away from the table today full of "holiday cheer" you may enjoy some time with family relaxing, watching football, playing with the kids etc. for tomorrow is the BIG DAY...

BLACK FRIDAY.

For many traditional retailers, the holiday season can represent anywhere between 25-40% of their annual sales (Source: National Retail Federation). This means starting tomorrow we will be bombarded with advertising, sale announcements and "pressure" to go out and spend, spend, spend! From now until April 15 is the most important time to manage your finances well.

We all like to spend money for gifts at Christmas especially for our close family. Having credit cards makes it easy for us to get what we want now and pay for it later but...will we be able to pay that bill when it arrives? If you take a few moments and develop a plan NOW, your finances will be very manageable for the next four months (and beyond if you stay vigilant).

Why did I mention April 15th? Well, that's when most people will receive a tax refund check from the government. Personally I prefer to manage my withholding on my paycheck to insure I do NOT receive a huge refund; I don't like the government getting an interest free loan from me! However, I know many folks like to get that big check and use it as a way to be sure they save and if that works for you fine...let it work FOR you! Here's how:

1. Look at last year's tax return and determine how much you got back last year. Review your current situation and make sure nothing has changed (e.g. marital status, withholding amount, home purchase, etc) that would affect your refund this year;
2. Estimate your 2010 tax refund. You can use this tool;
   
3. Develop a maximum Christmas budget and make sure it is less than the total amount of your expected refund;
4. If you do not have money available to pay for Christmas, use your credit card with plans to pay off the entire Christmas balance when your refund check arrives. Do NOT just make minimum payments until April to minimize the interest charged;
5. Remain disciplined between now and April to control your spending so that you can pay off the Christmas balance on your credit card and have money left over from your tax refund.

Make no mistake; you are taking a risk doing this. Your refund could be lower this year. You could have something catastrophic happen that would require more of your refund (e.g. need new transmission in car unexpectedly). There are many many different possibilities.

The point is I can't tell you exactly what to do in your situation. One size does NOT fit all. But, this is one way that you can budget for Christmas, obtain the "things" you want now and have a means to pay for them without incurring a huge amount of interest and/or additional debt and that....is priceless!