Two Biggest Ways People Wreck Their Finances

It never ceases to amaze me how two things can so often derail people's financial health: Christmas and vacations. For some reason, people throw money concerns aside when it comes to gift giving and "treating themselves" to a vacation. What's more, even people already in financial difficulty fall victim to it. Every year I see clients and potential clients who know they are over their heads in debt put off bankruptcy until after Christmas or one last trip. All they are doing, however, is making things worse.

This tendency was well demonstrated in a comic strip that I read every day, Edge City, about a married couple with two kids that live in the 'burbs. The husband wants to go on a lavish vacation on the credit card (how many more opportunities will we have to take a family vacation), while all his wife can see is the destruction of their budget and the 18% interest. She eventually gives in, much to their regret later.

I have posted before about how to save money and stay on a budget, including scaling back the cable package and trimming the cell phone bill. However, people should also consider ways to economize on gift giving and leisure if they are going to maintain their financial health. When I was a kid, people had Christmas Club accounts at their bank where they would squirrel away money all year in order to afford gifts. This has been replaced with plastic.

Do yourself a favor and make a New Year's resolution to be ready for Christmas in 2012. Open a savings account and contribute a pre-determined amount every month. Just figure out how much you will need to purchase modest gifts for essential friends and family on your list and then divide that amount by 12. Plan your vacation well in advance also and set the money aside. Your wallet will be glad you did.