The holidays are an exciting, fun and joyful time of year. And for many people, the holidays also are expensive. According to the Motley Fool Company, a financial wellness resource, the average American spent $882.45 on Christmas gifts, food, decorations, travel, and other holiday-related expenses in 2019. Around 56 percent of gift shoppers set a budget for holiday spending, but only 64 percent stuck to it. In addition, 21.5 percent of respondents went into debt due to holiday shopping.
Who doesn’t want to have a super holiday with delicious foods on the table and lots of presents to share with family and friends? While that’s tempting, such a bounty should never result in financial peril. These six strategies can make it easy to establish and stick to a budget this holiday season.
1. Budget for everything. When working out holiday spending plans, factor in all of the expenses associated with the holidays — not just the most obvious, like gifts. Costs for gas, parking lot fees, greeting cards, postage, travel expenses, and much more should be included in your final number.
2. Determine how much you can spend. Money for gifts and other holiday expenses should ideally come from your disposable income. Look at your finances in advance of the holiday season and figure out how much extra cash you have for the holidays, and use that figure to determine how much you should spend. Find ways to make up any deficit by curtailing expenses like dining out or entertainment extras. Many people plan to use credit cards to pay now and worry about the aftermath later. Only use credit cards if you have the money in the bank and can pay off the entire bill when the balance due is in January.
3. Set a spending limit for individuals. Based on your numbers and how much you plan to spend overall, start allocating money to categories, including gift recipients. Come up with a spending range for each person and stick to it.
4. Pay in cash as much as possible. It’s easy to know what you’re spending when using cash as opposed to credit. There is some risk with carrying around cash, but that risk may be offset by the benefit of spending only what you can afford to spend.
5. Track all purchases. Save the receipts and keep a running total of expenditures so you can see how you’re spending is measuring up to your budget. If necessary, scale back on one category if you’ve tipped the scales in spending on another.
6. Shop sales and deals. High-end stores may have the impressive tag, but their prices can set you back. Instead, look for comparable gifts at discount stores and other retailers. Also, if you must use a credit card, use one that earns you a cash-back bonus for added savings.
A holiday budget is a must to avoid overspending and finding yourself in debt early next year.