The Worst Holiday Money Mistakes

The top 10 worst and most common money mistakes.

By Jenna Goudreau

Are you a last-minute shopper, dashing to the mall on Dec. 24 to buy whatever's left at full price and with little thought? Perhaps you're the I'll-know-it-when-I-see-it gifter, who wanders from store to store without a budget or a plan? Or, are you a holiday pleaser, spending money you don't have to impress family and friends by how much you care?

Every year, the holidays are ripe for festive money crimes. To help you avoid them, financial experts weighed in on the season's worst and most common money mistakes-sure to leave January spending hangovers and sunk bank balances.

"The worst and most common mistake is going holiday shopping without a budget," says Pat Seaman, a director of the National Endowment for Financial Education (NEFE). According to its recent survey, 69% of Americans don't create a holiday budget.

In Pictures: Top 10 Holiday Money Mistakes

Creating a shopping list and budget is an essential first step to staying on track, but few people take it. Seaman suggests beginning by writing down all the people you hope to give to-remembering family, friends, coworkers and support staff-and possible gifts for each. She advises considering whether a handmade gift could replace a store-bought present. Your children's schoolteachers, for example, will likely be more touched by a thoughtful letter about their influence on your child than anything you might purchase.

Then, be careful to budget in all of the little expenses that will add up. "There are a lot of holiday gotchas," says Laura Rowley, Yahoo! Finance columnist and author of Money & Happiness. "A big mistake is not planning for the little things like postage on holiday cards, party gifts or holiday tipping." According to the National Retail Federation, Americans will spend $170 this year on decorations, greeting cards, candy and flowers-all easily forgotten on a budget.

Once you create a comprehensive list, you will begin to see where cuts can be made and plan how you will pay. "Do not use credit to buy gifts," Rowley warns. "The last thing you want to do is get into debt to make people happy." Ideally, you've come up with a reasonable budget and can pay for items in cash or pay off credit card purchases before any interest accrues. If money is especially tight, another option is to use interest-free layaway programs that many department stores and discount chains, like Marshall's, will be offering this year.

In Pictures: Top 10 Holiday Money Mistakes

Next it's time to look for deals. This year, retailers won't limit discounts to Black Friday but will offer deals throughout the season in-store and online, says Loren Bendele, CEO of Savings.com. However, many people don't invest any time into deal-hunting or comparison shopping. "It's a crime not to search for deals," he says, guessing that most people envision their grandmother's careful coupon clipping and think it's too much effort. Yet with the abundance of online tools, "you might save $30 in 15 seconds. That's not a bad hourly rate," says Bendele.

Before heading to the stores, you'd be smart to avoid another common money mistake sure to cause tension. "Most couples don't communicate about their spending plan," says Hollis Colquhoun, author of Women Empowering Themselves: A Financial Survival Guide. She says it's especially common among dual-earners that the couple doesn't sit down to discuss the budget or divide responsibilities. In fact, Hollis believes many overcompensate for something lacking in the relationship with pricey gifts that end up causing conflict over debt down the line. To reduce anxiety, you may want to agree to a limit of how much you will spend on each other. "There needs to be a meeting of the minds and a shared financial plan," she advises.

Once in the stores, it's critical to stay focused. "Malls are expert at making you spend," says Rowley. "They are enticing, and it's easy to become sensory drunken." Even among the well-prepared shoppers who created holiday budgets last year, 48% spent more than they had budgeted for, a recent Western Union survey found. Why? With an envelope of cash burning through their pockets, many slip up by making impulse purchases for themselves. An easy solution is to budget in a small gift for yourself, reducing guilt and the likelihood of overdoing it.

Click here to keep reading The Worst Holiday Money Mistakes.

See also:

In Pictures: Top 10 Holiday Money Mistakes
Women More Frugal Than Men This Holiday Season
Love and Money: Step-By-Step Guide To Financial Unity