What do hangovers, weight gain, and overspending have in common? The most successful programs to deal with them start with the same basic concept: Awareness of the extent of the problem. By my 35th birthday, I was tired of being 20-25 pounds overweight all the time. A month before my 36th, I joined Weight Watchers. Now almost 15 years later, I have fluctuated from time to time, but mostly managed to stick to good choices in my diet and exercise. The best tool Weight Watchers gave me was the daily journal. Seeing what I ate every day on paper had more impact on my decision making than any other single factor.
Imagine you had your electric meter inside your house, next to your thermostat. Do you think you would use less electricity? In studies where residents were told every day how many kilowatts they had used, they used 7% to 19% less electricity than those with outside meters who received their usage information in their bill, after the fact.
One of the biggest sources of financial regret, guilt, or even shame that I hear from people is that they spend too much over the holidays. It might be spending on others, or on themselves. How can this be avoided? I think one big help is to increase your awareness.
To maximize your spending awareness, now is the time to a) decide what you want to spend, and b) pick one payment method. The 3 payment methods are cash, debit cards, and credit cards. Let’s think about each.
Say you take your budget out of the ATM in cash and go shopping. As you are using it up, you can physically see it disappearing in your wallet. This is the most effective way to create awareness. However, it’s risky to carry around a bunch of cash, especially at the holidays.
Increasingly holiday shopping is being done online anyway. Let’s say you use a debit card. As long as you monitor your bank account balance every day, it’s almost like watching the cash deplete in your wallet. The problem with plastic is that psychologically, the card is handed back to us, and cash isn’t, so it reduces that feeling and awareness. Debit cards are safer than cash, but still a pain if your number is stolen online, as debit cards are especially prone to. Even though the bank does reimburse you for fraudulent charges, it’s not fun watching your own cash being spent by someone else.
Let’s say you use a credit card (and you would need to pick just one credit card). Most credit cards are like having the electric meter on the outside of your house. They report to you how much you have spent, after the fact. They never compare what you have spent to a predetermined budget amount, or the amount available to pay them back in your bank account. The closest I have been able to come in building awareness with credit cards is to have the company send a daily or weekly reminder of your charges for the month to date and the current balance. Not ideal, but better than nothing. Not all companies will do this, either. So if you wanted to boost your awareness with credit cards, you could check your balance on a regular basis, either every day, but at most every week, and transfer your charges for that period from your bank account. You might make 30 payments on your credit card over the holidays. The credit card company will tell you how much you have made in payments for that billing cycle, so that’s the closest I can think of to watching your actual spending.
So if you are concerned about how you will get through the holidays without financial regret, plan in advance how to stay aware. And if your hangovers are of a different kind, well, that’s a whole other program.