It’s not too late to set a holiday budget. Here’s how to build one and stick to it.
‘Tis the season to be merry. And spend money — a lot of money, according to the National Retail Federation, which expects holiday spending to reach record highs this year. We get it — during the holidays you travel more, you shop more, you host more, you decorate more, and you eat more. All of which can add up to your holiday budget taking a direct hit from Santa’s sleigh.
But what is a reasonable amount to spend this time of year? And what are the best ways to keep your holiday budget in check ?
Know How Much You Can (And Should) Spend
Some financial experts say that 1% of your income is an acceptable amount for a holiday budget. But considering that some people may have more discretionary funds than others, it’s hard to put an exact percentage on what your spending should be. “It’s best if you think hard about what amount of holiday spending is appropriate for you,” says Jesse Mecham, Creator and Founder of the YNAB app. Look at your budget, determine an amount that works for you, and decide what amount you want to spend, he says.
Another approach is thinking about your holiday spending all year long—or at least thinking about it enough to set aside money for it throughout the year. “I suggest that people save for the holidays all year long,” says Smart Shopping Expert Trae Bodge.
Base the amount you need to save on a list of recipients and how much you typically spend per person. Compare this amount to how much you can afford to sock away each week or month, based on your budget, Bodge says. “If you can afford $10 per week, that gives you almost $500 to spend on holiday gifts,” she explains.
Include All Holiday-Related Expenses in Your Budget
In addition to gifts, be sure to include ALL seasonal-related expenses in your holiday budget, such as decorating, dining out, and travel. As you spend on things like decor, for example, be as smart as possible about it – and don’t go overboard. “I always recommend that people buy things that they can re-use year after year,” she says. “You certainly don’t have to have as many lights as your neighbors.”
Signs You’re Spending Too Much
Going all out for holidays is fun, but not if you have to pay down debt for years to come. According to a recent report from NerdWallet, 28% of shoppers who used credit cards to pay for holiday gifts last year are still paying off their balances.
Your holiday shopping shouldn’t cause your other financial goals to take a backseat, says Certified Financial Planner Bobbi Rebell. “If your holiday spending impacts your ability to pay for other priorities, like your debt, or your regular bills—and yes, your savings and investments—then you’re spending too much,” she says.
Also, keep in mind that something as simple as feeling bad about your spending may be one of the best indicators that you’re overdoing it, experts say.
What To Do If You’re Paying Down Debt During the Holidays
The amount you have to spend on holiday purchases may be small, and this is perfectly fine, especially if you are paying down debt this year. “It’s important to keep in mind that few people would feel good about receiving a gift that was financial stretch for the giver,” says Rebell.
After all, it truly is the thought that counts, not the size of the gift. “If you are in debt to the point where you are falling behind on your monthly payments, it’s time to ask for a break over the holidays so you can catch up,” says Bodge. Your family and friends will understand. And don’t forget that if someone asks you what you want for the holidays, it’s perfectly acceptable to ask them for a contribution toward your student loans or credit card debt instead of a gift, she adds.
Plan Ahead for Next Year
In January, set aside 20 to 30 minutes to reflect on your holiday spending, then decide on your budget for the upcoming year, says Mecham. This is the time when you decide if you will spend the same amount, or less or more. “If you set aside time to think about it for a moment, then you’ll know all year long that you’ve got the Christmas bill coming up,” he says.
Planning for next year could also mean coming up with a strategy for doing things differently. “For example, if you exchanged gifts with all your siblings, aunts, uncles, cousins and parents, suggest drawing names or just agree that only the kids receive gifts,” Bodge shares. You may be surprised that many of your family members will be relieved you suggested it!
Consider Alternatives to Spending
There are countless activities that don’t involve money but still allow you to make the most of the holiday season. For example, consider serving at a soup kitchen or shelter this year with extended family or friends in place of giving gifts. “Serving together is certainly more rewarding than walking through a mall,” says Mecham.
If you think about the things that you are good at, such as assembling furniture, gardening, or babysitting, you could also offer your time or services to others instead of purchasing gifts, says Bodge. “Or if you really want to give something, bake, make jam, or hand-make something,” she suggests.
Corporations may have convinced us that the holiday season is really the season of spending, but we all need to remember that it’s really the season for giving, whatever that gift—big or small—may be.
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