It’s easy to get caught up in the magic of holiday spending. But if you rely on credit to make holiday wishes a reality, the magic often falls flat when your bills come due. Take the time to create a holiday budget and avoid a post-holiday spending hangover.
BE REALISTIC
Setting a realistic but firm budget is the best thing you can do to curb your holiday spending.
According to the National Retail Federation, most people spend around $1,000 on holiday merriment. This amount includes gifts, holiday items, and expenditures for non-gift purchases, like family photos or special outfits for parties.
But planning to celebrate the holidays and being able to afford them are two different things. A U.S. News & World Report survey says an estimated 4 in 10 people plan to go into debt to finance gifts and travel.
To create a holiday budget, look at what you spent last year. Consider the impact of spending on your budget—for instance, were you paying off credit card bills for months after the holidays? Did you have to skip the family summer vacation because Christmas was too expensive?
Be honest about the trade-offs that you’re making with your current holiday spending. That will strengthen your resolve to stick with a budget this year.
EVALUATE INDIVIDUAL EXPENSES
As you create a budget, look at each expense. Try to be as comprehensive as possible. Think about:
- Gifts for immediate family
- Gifts for extended family
- Gifts for friends, neighbors, and coworkers
- Travel expenses like gas, flights, and hotels
- Food and party supplies
- Christmas cards
- Postage and shipping
- Gift-wrap supplies
- Interior and exterior décor
Add up what you plan to spend and determine whether that spending fits inside your budget.
ADJUST EXPECTATIONS
Choosing an appropriate budget may mean you need to celebrate in a different way than in years past. If this is true, have an open conversation with loved ones and let them know you should opt out of traditional gift exchanges.
Or arrange with family to do gifts of time and service instead of physical gifts. This isn’t as exciting for younger family members, but older ones may appreciate help decluttering or organizing spaces in their home, sifting through family photos, or another project.
Spending money on someone or something in the past doesn’t mean you must spend the same amount forever, especially if you have to go into debt to do so.
MAKE A LIST & CHECK IT TWICE
Getting organized with your gift-giving can help you take advantage of holiday sales and get the best prices on items. Keep track of your gift list and spending (there are apps for this!).
You can also try an app to find the best price on popular items. Or, check prices between a few of your favorite online shopping sites. A few minutes of searching can save you lots of money.
If you plan to shop at brick-and-mortar stores, set aside a day for shopping instead of many little trips. This saves money on gas and helps curb impulse buys. Think through your driving route ahead of time, too.
Stop looking at fliers, email promotions, deal websites, and in-store sale signs when you’re finished shopping. That way, you won’t be tempted to buy whatever amazing deal happens next.
CASH OUT REWARDS
If you use a credit card with rewards points or cash back, the holidays are a great time to put those perks to good use.
This feels like “free money” you can use to purchase gifts, pay for travel, and more. Your card may offer additional rewards or cash-back bonuses for spending at certain stores or categories. If this aligns with your planned purchases, why not take advantage of it?
If you’re in the market for a new rewards credit card, the holidays can be an ideal time to sign up. Many rewards cards have bonuses for hitting a certain spending amount in a designated period. But remember, while higher holiday spending can help you hit bonuses that may otherwise be a stretch, only spend what you can reliably pay off before interest hits. Spending money you can’t afford to rack up rewards isn’t a bargain.
PLAN FOR NEXT YEAR
If you’re tired of feeling the holiday pinch, save for the next holiday season now. Break your targeted budget into doable chunks, whether daily, weekly, or monthly. Finding $25 or $50 in your monthly budget is much easier than finding $300 or $600 when the holidays roll around. Even if you only plan to save half the amount, you still do your future self a favor.
Automate the process to make it even easier. Open a Christmas Club account for holiday spending and set up automatic deposits into the account to help you hit your savings target.
