Today may be the official first day of Fall, ushering in the cooler temperatures (hopefully) and vivid Fall colors so many of us love. But for retailers, it is the start of the holiday season. You’ll find Christmas ornaments, Frozen Halloween costumes and Thanksgiving centerpieces scattered throughout the stores. It may seem a little early to decorate your Christmas tree, but it’s definitely not too early to start planning your Holiday Budget.
This is the big question that faces all of us and it’s one that not enough people think about before they start spending. We have a tendency to wait until after the holidays to look at what we spent and wind up starting the new year with new debt. This is the year we’re going to break that habit. The goal is to have wonderful holiday without creating debt. It is possible with a little bit of advance planning and setting a budget.
Start by figuring out FIRST how much money you can set aside for the holidays without creating debt. Don’t guess-estimate. How much money can you set aside each paycheck until December? That is your initial budget.
If your budget seems too small, you can earn additional money and/or reallocate funds from other categories, such as entertainment or clothes. Do not stop funding your goals or lower your debt repayments.
The holidays roll around the same time every year, but most of the time, we aren’t financially prepared for them. We may set aside the money for gifts but forget about all the other holiday expenses, so we still end up creating debt. Plan for the following categories.
This is one of the biggest expenses of the holidays. Some people like to buy gifts year-round, other’s don’t. There is no right or wrong answer as a long as you have a budget for each person on your list.
Are you hosting festivities in your home? Or attending elsewhere but need to bring a dish to pass or a hostess gift? Will you bake or buy holiday goodies?
Savings Tip: Now that you have a plan created and know the items you need, check your grocery store’s sales flyer every week to see if any of the items are on sale and stock up. Also keep an eye out for coupons to help lower your costs. Also don’t be afraid to ask guests to bring a dish or beverage to share.
December always seems to be a busy month with holiday concerts, parties and multiple family gatherings. People tend to forget that will likely need an extra tank of gas or two in December, so plan accordingly. If you are traveling by air this holiday season, don’t forget to include any airport parking, cab fares or pet sitters you may need as well.
Got overnight visitors? Many do this time of the year, which generally means a least a bump in your grocery bill and/or dining out budget. Depending on the length of stay and whether you are expected to entertain them, your entertainment budget will likely increase too.
Do you need to replace any decorations this year? If so, list and price them out. Don’t forget about wrapping supplies either. We tend to have an overabundance of wrapping paper but may need tape, tissue paper and/or ribbons and bows. Many of those items can be picked up at the $1 Store too.
Savings Tip: Unless something absolutely needs to be replaced now for safety reasons (tree is going to tip over and fall on someone or you accidentally threw out your child’s Christmas stocking), wait until right before Christmas or afterwards when items are heavily discounted and/or on clearance and save it for next year.
Do you send out Christmas cards? We may think they are inexpensive, but the costs do add up quickly, so again plan for them.
Savings Tip: If you send traditional Christmas cards, you can typically find them heavily discounted right before and after Christmas to use for the following year.
There are always unexpected expenses at the holidays. Someone we accidentally left off our gift list or a party invitation we didn’t expect but would like to attend. You may have increased babysitter costs in order to attend your various festivities too. If you set aside a little money for those miscellaneous expenses that pop up, you won’t panic over how to pay for them.
I find whenever we clearly outline our expenditures, it is often an eye-opening experience. We generally tend to think we spend less than we do, which is another reason why we frequently experience sticker shock in January when we get our credit card bill. Now that we can see what we want to spend in each category, we can assess whether that is a reasonable number based on our personal financial situation and values.
Remember, this isn’t a competition. Don’t try to play keep up. Can you reduce costs or even eliminate some expenses? This is a personal choice, but remember, your goal is to have a debt-free holiday. Organize the categories based on priority and then again within each category figure out what means the most to you.
To help make next year’s holiday budget more accurate, track your spending this year. Note expenses that you didn’t plan for but realize will be ongoing holiday expenses. After the holidays, compare how you did. Now you’ll have a much better idea how much to save for next year’s budget and can start saving in January.
I love giving gifts and I would be lying if I didn’t admit that I enjoy receiving them too. But I also want to make it very clear that gift-giving is not an obligation, especially when it comes to adults. I don’t want anyone to create debt buying me a gift and hope you feel the same way. Look for low-cost/no-cost ways to celebrate the holidays together. And for many adults, the best gift of all is simply spending time together with loved ones. It’s okay to let that be the gift you plan to give and want to receive this year.
What’s your biggest holiday budget buster? What’s your best holiday savings tip? Tell me in the comment section below!
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SHANNON RYAN, CFP®
We still buy for our own kids but we also pared that down years ago and normally follow the 4 gift guideline of: something you want, something you need, something to wear and something to read. At our house Santa follows the same plan, plus a stocking full of fun things and some practical stuff.
I may be a scrooge this year and limit my gifts to only the children. I'm slowly convincing my (gigantic) family that Christmas is more fun if we just spend time together instead of stressing about what to give everyone. I get a few more converts every year! :)
If you credit card has any option to redeem your spending as gift cards, order those early and give them as gifts, or use them yourself towards gifts you plan to purchase.
We've been saving for the holidays since the beginning of the year. So when Christmas rolls around we will be able to buy gifts with cash. I do like the idea of having a holiday E-Fund. Stuff always comes up and that would be a good way to handle it.
We have a small gift list and most of it focuses on the kids. In our family everyone pretty much accepts the fact that Christmas is a finacial strain and the children should be #1.
Happy Holidays,
Jess