Patricia Lovett-Reid

Last week we looked at some of the financial missteps we often make during the holiday season: overspending, waiting until the last minute, incurring debt and not paying that debt off quickly. This week, I would like to focus on the positive steps we can take to ensure that we get the most out of every dollar we spend.

* Related: Don't let holiday spending get out of control

Canadians spend about $1,500 every holiday season according to the Retail Council of Canada. Here's the shocking part: We put ourselves on the top of our "nice" list. That's a teeny, tiny bit naughty if you ask me. I know a significant portion of that $1,500 goes to food and decorations when we entertain, cabs and babysitters when we don't, and even travel expenses to visit with family in other cities. I also know that it is hard to resist the temptation to buy a new sweater or iPod when we're shopping for others. It's not easy. Retailers do a great job of appealing to our desires. If you're serious about reducing your holiday spending, purchase gifts for the important people in your life. You can treat yourself after the holidays during the big sales at the end of December or early January.

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That being said, many of us will need to shop for ourselves during, or leading up to, the holiday season. Often people find themselves going from one holiday function to another and our wardrobes need to keep up.

One way to stretch the wardrobe budget is by creating a capsule wardrobe. The concept centers around the basics that we all need in our closets. These items are the backbone of our wardrobe and as such should work with everything and be completely interchangeable. For that reason, it must be based on a few timeless, best-quality items with the most flattering cuts. Make sure that any piece you're buying can be interchanged a minimum of three times with any outfit. For example, if it's a top, it needs to go with at least a skirt, a pair of jeans and a pair of trousers. It makes a lot more sense than buying a new outfit for a specific event. Shopping for every event could cost a small fortune this time of year. With a capsule wardrobe you'll wind up with better individual items, and more of your gift budget intact.