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3 Simple Steps to Make Sure Your Holiday Spending Doesn't Get Out of Control

Don't start the New Year in debt.

Art Credit: Belathee Photography

It might seem a little early to be thinking about your holiday budget, but according to a 2012 study by the American Research Group, the average American spends about $854 a year on gifts alone. You'd need to save $100 for 4 months if you plan to spend even half of that. And 4 months before December puts you smack dab in August. I guess taking a crack at your holiday budget now wouldn't be that crazy or early after all!

If you're like the rest of us, and you don't think about your holiday spending until, oh, say the week before Christmas day, don't panic. You've still got enough time to take a good look at how much you plan to spend this holiday, what exactly you'll be spending it on, and whether or not you can actually afford it.

Here are three simple steps to put a reality check on your holiday expenses so that you enter the New Year without entering into debt (tip: only use credit cards you can pay off in full right away).

1. Determine your budget. You might be tempted to draw up your gift list before you even think about your budget, but doing so leads to out-of-control spending. Determine how much you can afford to reserve from each new paycheck that you will receive from now until mid-December. Maybe you can't afford to save $100 per paycheck, but $50 per paycheck might be doable. And with about a month and a half left until the holidays, this means you'll at least be able to put away $150.

Having a hard time saving up? Think about what you can give up in order to give to those whom you care about most. Meals out, Starbucks pumpkin spice lattes, manicures, and sweaters on sale are usual suspects that you can happily sacrifice for a month or two if you know it means you can give grandma a new and much-needed pair of warm fuzzy slippers.

2. Set a spending limit for each holiday expense bucket. Gifts aren't your only holiday expense. There are decorations, entertaining expenses, cards, postage, travel, wrapping supplies, holiday foods, party outfits and charitable donations to be made. Make a list of categories you'll definitely spend on this year, and set a budget for each area depending on your overall budget.

3. Get creative. Whether you've figured out that you can actually afford to gift all your loved ones a new flat-screen TV, or you've realized that you're really going to have to skimp on presents this year, there is no better reason than the holidays to get creative with giving.

Homemade cards and DIY presents lend a thoughtfulness and warmth to the season that just can't be bought. One of the most memorable gifts I've ever received is a simple card from a friend saying she spent a day volunteering at a soup kitchen for homeless women in my name. It was a heartfelt reminder of the beauty and generosity of others, and to remember to give graciously to those less fortunate than I. Isn't that what the holidays should really be about?

( Photo by Belathee Photography)