Were you naughty or nice?

PART 3 OF 3Dealing with holiday bills

Healthy Finances

You knew it would come and here it is: January. The bows are gone and the bills have arrived. Don’t despair. Think of these bills as a progress report on how you handled the sprint toward the holidays this season. Big, unexpected bills mean it’s time to get ready for the 2008 season now.

Open the bills

This is no time for procrastination. Delays only cost you more money in accruing interest and late fees. Open the bills as soon as they arrive. Make a list of the balance owed on each bill, the minimum payment and the date it’s due.

Set up a payment plan

If you can pay the entire balance now, do it. If not, at least pay the minimum balance due on time. If you have a little extra cash, use it to pay down the highest rate credit balances first. If, however, you can’t even pay the minimum, call your creditors immediately and ask them to help you set up a payment plan.

Count the cash you spent

Gather all of your receipts and tally up how much you spent. Do it now, while it’s still fresh in your memory.

Create your budget for next year

Once you know how much you actually spent, you can compare it to your plan and see where you overspent. Did Aunt Joan’s sweater cost more than you expected? Or did you end up buying for people who weren’t in the original budget? Highlight all the"extras” and either eliminate them or increase your budget for next year to include them.

Set up an automatic savings plan

Once you have an idea of what next year’s spending might look like, you have your savings goal. And once you have a goal, you can create a savings plan that will help you reach it. It’s a lot easier to save $50 a month toward a $600 holiday budget than to come up with all $600 next January. And it’s easiest if you set up an automatic savings plan through your bank so the money is swept into a savings account regularly without any future involvement from you.

If you can’t afford the monthly savings in light of your monthly expenses, it means your holiday budget is unrealistic. Better to find out now, before you spend the money. Take it as a sign that you need to go back to your budget and keep cutting until this monthly savings plan makes sense. Take heart: You have an entire year to knit scarves or come up with other low-cost, creative holiday presents for everyone on your list.

Involve the kids

Now that your holiday spending plan is well in hand, it’s time to grab the kids and walk through the same steps with them. This past season’s experience is an excellent foundation for next year’s holiday budget for your kids as well.

Have the kids review last year’s gift list and decide who they’ll want to give gifts to this year. Then help them think about how they might be more creative—and frugal—next year. Yes, Grandma liked the new leather gloves they bought her, but would she have been even happier with a promise of a weekly visit or phone call or a coupon book promising free snow shoveling this winter?

And be sure to share your own budgeting mistakes with them. If your kids are old enough to understand the process, ask them to help compare the money actually spent with the budget and analyze how thing went astray. You might be surprised at the creative answers your kids will come up with to avoid making the same mistakes again.

But, most importantly, talk with your kids about what brought joy to the holiday season for everyone. Start by asking everyone to talk about the best moment of the season. Was it a cash moment? Or something free, such as time to read, play outdoors or just sit around a table and enjoy one another.

What you all are likely to discover is that the best things in life—and during the holidays—have nothing to do with money.

Write it down

Finally, you are ready to put your plan on paper. Putting the plan in writing makes it concrete. That’s not to say it won’t be revisited as the year progresses, but this first plan gives your family a road map for the year that will get you safely to and through the holidays.

Post your written plan prominently, in a place where it will remind you of your goals all year long—especially this summer when it’s hard to believe the holidays will ever come again. Besides, if you already know you’ll be buying Aunt Joan a sweater next year, she doesn’t need to know you bought it in the after-Christmas sales last year,

does she?

Susan Beacham is the founder and CEO of Money Savvy Generation, a financial education company that provides innovative products and services to help parents and educators teach children the basic skills of personal finance, www.MoneySavvyGeneration.com. E-mail her at susan@MSGEN.com.

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