Nov 1, 2022, 1:14:33 PM | Reading Time: 5 minutes
The holidays can be an expensive time of year for many people—where the average household spends $1,463 on holiday shopping and 36% of Americans take on debt going into the new year. Plus with inflation and the growing cost of many items, the financial strain can become a very real concern. While treating your loved ones with generous gifts can be a joyful experience, you may also want to avoid financially putting yourself in a precarious position. By setting some ground rules for yourself and creating a holiday budget, you can help prevent overspending and can celebrate the season without the increased stress and worry. Here are five tips to help you budget for holiday spending.
One of the most important steps in preparing for holiday spending is creating a budget. When you have a set amount in mind before heading into the holidays, you can be more likely to steer clear of unnecessary expenses and can give yourself a clear framework to prioritize what you need to buy. This budget can also include travel expenses, food and drink costs, and purchases needed for events or gatherings.
In 2021, Americans planned to spend approximately $998 during the holidays, with roughly $600 for gifts, $200 for food and decorations, and around $100 for non-gift purchases. If these amounts make sense for your financial situation, you could break down your budget into these categories, or make adjustments to match your circumstances.
There are many ways to establish a budget and help you keep track of expenses and whether you’re staying on track. If you prefer a written method, you can use a notebook with a folder to keep a running tally of all your expenses and receipts. For each purchase, subtract that number from your overall budgeted number. Keeping an electronic spreadsheet can simplify this process and the spreadsheet can automatically subtract each incoming expense from your total. If you prefer, you can also take advantage of the numerous budgeting apps available that let you track spending, categorize expenses, and even connect with your accounts. You can set limits for each of these categories and many apps will notify you if you’re getting close to these amounts. No matter what method you choose, actively monitoring your spending will help set you up for success.
Holding yourself to your budget is a key to helping make it through the holidays without racking up a high amount of debt. By making a point to establish your budget early in the year, you can begin to set aside money specifically for holiday expenses. If you have this money only allocated for holiday-related purchases, you could pay off your credit card bill in full or in much less time to help avoid interest fees and increasing debt.
You’re not alone if the holidays are a stressful time of year for you. More than half of Americans are feeling wary about the financial strain of the holiday season
. Along with proper preparation and budgeting, there are a few other ways to help lessen holiday anxiety and let yourself focus on enjoying time with family and friends. If possible, begin shopping well in advance, allowing the costs to be spread out. Look for sales and items on clearance throughout the year that then can be set aside. You can also discuss other gift ideas with your loved ones, like taking a cooking class together, exchanging homemade gifts, venturing on a day trip, or organizing a movie night.
To set aside money year-round for the holiday season, many financial institutions offer holiday savings accounts. These allow you to routinely deposit money into the account. Many of these accounts can only be accessed after a set date, which can help you avoid dipping into them for other purposes. Many also allow you to earn interest on your balance and make unlimited deposits. You can check with your bank or credit union to see if they offer holiday accounts.
While your expenses may commonly increase during the holidays, you may also want to take a closer look at your year-round spending habits and how you can tighten your budget to lessen the financial strain that may spike at the yearend. As you review your finances, are there ways to cut costs? Perhaps you have streaming services or memberships you no longer use, or you could cut down on food delivery, eating out at restaurants, and unnecessary online shopping.
Budgeting and finance tracking apps are not only great for the holidays but can help keep your spending in check all year long. Many apps allow you to conveniently track your budget on your computer or mobile device and can reveal valuable insight into your spending habits. Where is your money going each month? Are there categories where you could cut back your spending? By knowing exactly where your money is going each month, you can be better informed about how to save more and spend less.
The rising costs of everyday items are on the minds of many people, 2 in 5 Americans
say inflation will change their holiday shopping habits this year. Inflation is currently around 40-year highs
, helping make it even more challenging to stretch every dollar and avoid going into debt as purchases ramp up. You may need to decrease the number of items you buy this year, find inexpensive and creative ways to celebrate with loved ones and take advantage of coupons and discounts as much as possible. Some websites and apps allow you to compare shops to find the best deals.
The holidays can be a fun-filled time of year, but also a season that brings on extra financial and emotional stress. Become best friends with your budget and plan as much as possible to help avoid overspending and carrying debt into the new year. By incorporating a few budget-friendly tips and tricks into your life, you can spend less time worrying about your expenses and more time enjoying the holiday season.