The holiday season can be a great time to get together with the family. However, December can also be a relatively expensive month when it comes to buying presents and purchasing decorations. That is why to mitigate unnecessary spending, it’s essential to set a holiday budget. Here is a look at how you can create a budget that keeps your holiday spending in line.
Setting Up Your Holiday Budget
Set an amount that you want to spend
First, you should consider how much you could afford to spend for the entire holiday season. This includes the cost of presents, decor, holiday dinner, and other related expenses. Once you have a number, you can set up a budget and decide how much to spend in each category.
So, what should that “big number” be? It would help if you tried to think of a number that will not put you into debt. Of course, that number will depend on things like your salary and your current savings. The main idea here is not to go in over your head on holiday spending.
Use a budget app
If you have not set a budget before, then you may have trouble knowing where to start. One way to set a budget is to use a spreadsheet or a budget app. By doing a simple search using your preferred search tool, you can find a variety of free budgeting apps and spreadsheets to help you track. There are many free budget apps available for both Android and iOS that offer a robust number of tools to help you set your holiday budget.
Adjust your spending in other categories
When you’re setting up your holiday budget, you might consider adjusting your regular monthly budget to ensure you don’t overspend and add more debt to your financial situation. For instance, you may want to cut down on your grocery spending or perhaps forgo dining out for a couple of weeks. This will help you stay on budget for your holiday spending.
Try to adjust your spending at least three months before the holiday. This will allow you enough time to save up for your increased spending. The last thing you want to do is dive deep into your credit cards to make your holiday budget work.
Write a list of everyone who will get presents
You may want to create a list of everyone who will get gifts. This will allow you to assign a budget to every present on your list. You don’t want to buy twenty presents and find out that you have two more gifts to buy after you have spent all of your money. Here’s a list of people that you may be purchasing presents for the holidays:
• Family members
Set up a holiday savings fund
You may consider setting up a holiday fund at a bank so you can separate your funds and prevent yourself from spending that money. Some financial institutions may allow you to set up a separate account for spending. If you don’t want to open a second account, you may want to consider simply holding that money in your savings account.
You do not want to be tempted to spend your holiday budget on other items. Try your best to keep yourself a couple of steps removed from being able to access the funds.
A good tip is to prioritize where you will spend your holiday money in case you do not have enough to handle all your holiday expenses. For instance, you may want to prioritize presents over holiday decor. You may also consider spending first on a tree before spending money on other holiday ornaments.
You can set up a priority list that looks something like this:
1. Family presents
2. Holiday dinner
3. In-law presents
4. Friend presents
5. Staff presents
6. Lights and decor
Assign money to each category
As you create your budget, be sure to assign a dollar amount to each category. This will allow you to have a better idea as to how much you want to spend. You can use a budgeting app to assign a dollar amount to all your holiday spending.
Here is an example: Let us suppose you have $3,000 to spend on the holidays, you can break down the spending like this:
• Family presents = $1,000
• Holiday dinner = $200
• In-law presents = $500
• Friend presents = $400
• Christmas Tree - $100
• Staff/coworker presents = $400
• Lights and decor $100
• Emergency money = $300
Avoid credit cards and other forms of debt
The last thing you want to do is get yourself into debt or maybe even further in debt when it comes to spending during the holidays. 55% of Americans don’t regularly repay their credit card balance in full. That adds up to a lot of interest to be paid each month. This could end up compromising your budget for the following year. See how much money that you have to spend for the holidays and stick to your budget.
Schedule purchases for Black Friday and Cyber Money
One of the best ways to save on your holiday shopping is to make your purchases on Black Friday and Cyber Money. On these days, you can find some significant savings on your presents.
Be sure to check for sales about a week before these dates. This will allow you to better plan out your shopping schedule, and your budgeting for presents.
Leave yourself a little breathing room in your budget
If possible, try to leave a little “wiggle room” in your holiday budget. This will allow you to have some flexibility for the unexpected. For instance, let us say that you find out that you will have two extra guests for a holiday party; you will want to make sure that you have enough food available.
It would help if you aimed to have anywhere from 5% to 10% of your holiday budget dedicated to unexpected spending. That may allow you to have enough breathing space for those surprise situations.
Spending smart during the holidays
The holidays do not have to make a big dent in your budget. Be sure to have a plan, spend wisely, and have room for the unexpected. With a well-planned holiday budget, you could have a more stress-free holiday season.