It’s easy to get caught up in the magic of holiday spending. But if you’re relying on credit to make holiday wishes a reality, the magic often falls flat when your bills come due. Take the time now to create a holiday budget and avoid a post-holiday spending hangover.
Be realistic
Curb your holiday spending by setting a realistic but firm budget. Most people spend around $1,000 on holiday merriment, according to the National Retail Federation. This includes gifts, holiday items, and non-gift purchases, like family photos or special outfits. 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, start by looking at what you spent last year. Consider the impact that spending had on your budget. Were you paying off credit card bills for months after the holidays? Did you have to skip a family vacation because Christmas was too expensive? Be honest about the trade-offs 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 individual 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 or not 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 need to opt out of traditional gift exchanges.
Alternatively, consider arranging with family to do gifts of time and service instead of physical presents. While this may not excite younger family members, older relatives may appreciate help with decluttering or organizing spaces in their home, sifting through family photos, or other projects.
Spending money on someone or something in the past doesn’t mean you must spend the same amount forever, especially if you’re putting yourself in debt to do so.
Make a list and 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. If you plan to shop at brick-and-mortar stores, set aside a dedicated day for shopping instead of multiple little trips, which saves money on gas and helps curb impulse purchases.
When you’re finished shopping, stop looking at fliers, email promotions, deal websites, and in-store sale signs. That way you won’t be tempted to buy whatever amazing deal pops up 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. Your card may even offer additional rewards or cash-back bonuses for spending at certain stores or categories.
If you’re in the market for a new rewards credit card, the holidays can be an ideal time to sign up. Many cards offer bonuses for hitting a certain spending amount within a designated timeframe. But remember, while higher holiday spending can help you hit bonuses that may otherwise be a stretch, only spend what you can comfortably pay off before interest hits.
Plan for Next Year
If you’re tired of feeling the holiday pinch, start saving for the next season now. Break your target budget into doable chunks, whether that’s a daily, weekly, or monthly amount. Finding $25 or $50 in your monthly budget is much easier than trying to find $300 or $600 when the holidays arrive. Even if you only save half of your goal, you’re still doing your future self a favor.
Automate the process to make it even easier. Many financial institutions offer additional savings accounts at no cost. Open a new account for holiday spending and set up recurring transfers to help you reach your target.
Ready to start planning? Check out our Banzai Holiday Budget Coach!
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