Consumers are getting better and better when it comes to holiday spending. We’re learning to budget in advance to make sure that we only spend what we can afford. We’re increasingly using cash or debit cards instead of credit cards to pay for holiday expenses. We’re setting up Christmas funds to save for the holidays throughout the year. We’re making more gifts and decorations for the home and spending less on the gifts that we purchase for others. However, as the holidays get closer and closer, many of these things we’ve learned to do fly out the window. In the days leading up to Christmas and the New Year, many people suddenly make last minute money mistakes.

Photo: when i was a bird

Here are five common end-of-the-year money mistakes to actively avoid this holiday season:

1. Last minute gifts. The biggest mistake that people make right before Christmas is that they buy gifts at the last minute. Usually it’s because we’ve either forgotten someone on our Christmas list or we’ve failed to find the right gift for that person. Last minute gifts rarely fit into our budgets. Often we make rash decisions because we’re in a rush, wasting money that we wouldn’t waste if we had the time to think clearly about the cost. If you find yourself in this position this year, take a breath and pause for a moment. Give the person a meaningful gift that doesn’t cost anything right now. For example, give the gift of your time and service by writing a personalized coupon for the recipient.

2. Party spending. The end of the year is filled with party invitations. We put off thinking about this until the day of the event. Suddenly we realize that we don’t have the right clothes or we need to pick up a bottle of wine for the party’s host. In our rush, we overspend. Don’t do it! If you decide to go to parties this year then remember that it’s your presence, not your presents, that matters. Enjoy your time with friends this holiday season but don’t waste money doing it. Another related money problem is the impulse to go to expensive holiday events such as plays or New Year’s Eve bashes. Come up with a cheap alternative instead to ring in the New Year right without blowing the last of your 2010 budget.

3. After Christmas sales. At the end of the year many items go on deep sale and we get tempted to get those deals. We want to save money on next year’s holiday items by purchasing them now at a discount. Many of us make huge mistakes by doing this. We get good discounts but then we end up re-purchasing the items the following year because we’ve misplaced them or forgotten about them or don’t like them anymore or didn’t get what we actually ended up needing. Additionally, we have to store these extra items in our homes all year long, which clutters up our space and leads to stress throughout the year. Unless you’re super-organized, know exactly what you’ll need next year and have the cash now to pay for it, it’s not worth it to take advantage of most post-Christmas sales.

4. Post-season “me” shopping. Many people spend their holiday budgets on others and then feel a little bit disappointed after the holidays that they didn’t get what they themselves wanted. They end up indulging in January even though they can’t afford to, purchasing the items that they wanted but didn’t receive. Alternatively, some people feel the urge to treat themselves to a nice time after the stress of the holidays, paying for professional massages, salon days or vacations. Come up with some free / cheap indulgences for yourself to enjoy in the month ahead to avoid the impulsive spending of your holiday hangover.

5. Expensive New Year’s resolutions. What are you going to resolve to do in the New Year? Many people make New Year’s goals that conflict with their financial goals. They make a plan to save more money and yet make a resolution to do something that they end up spending money on. The biggest example is the resolution to exercise more. It’s the most cliche resolution there is and yet it remains common. Too many people still head to their local gym right after the holidays to sign up for a pricey membership, convinced that the expenditure is worth it because they’re really going to stick to their plan to exercise more this year. Make sure that the resolutions that you make complement one another and do not compromise your financial goals. If you want to exercise more in 2011, that’s great, but don’t waste your money on that gym membership when you can join a hiking club or set up a yoga day in your home for free.

What is the biggest money mistake that you’ve been guilty of making during the holiday season? Share it in the comments so others don’t make the same mistake!