holiday budgeting Archives - The Franklin Shopper

The holidays are an exciting, fun and joyful time of year. And for many people, the holidays also are expensive. According to the Motley Fool Company, a financial wellness resource, the average American spent $882.45 on Christmas gifts, food, decorations, travel, and other holiday-related expenses in 2019. Around 56 percent of gift shoppers set a budget for holiday spending, but only 64 percent stuck to it. In addition, 21.5 percent of respondents went into debt due to holiday shopping.

Who doesn’t want to have a super holiday with delicious foods on the table and lots of presents to share with family and friends? While that’s tempting, such a bounty should never result in financial peril. These six strategies can make it easy to establish and stick to a budget this holiday season.

1. Budget for everything. When working out holiday spending plans, factor in all of the expenses associated with the holidays — not just the most obvious, like gifts. Costs for gas, parking lot fees, greeting cards, postage, travel expenses, and much more should be included in your final number.

2. Determine how much you can spend. Money for gifts and other holiday expenses should ideally come from your disposable income. Look at your finances in advance of the holiday season and figure out how much extra cash you have for the holidays, and use that figure to determine how much you should spend. Find ways to make up any deficit by curtailing expenses like dining out or entertainment extras. Many people plan to use credit cards to pay now and worry about the aftermath later. Only use credit cards if you have the money in the bank and can pay off the entire bill when the balance due is in January.

3. Set a spending limit for individuals. Based on your numbers and how much you plan to spend overall, start allocating money to categories, including gift recipients. Come up with a spending range for each person and stick to it.

4. Pay in cash as much as possible. It’s easy to know what you’re spending when using cash as opposed to credit. There is some risk with carrying around cash, but that risk may be offset by the benefit of spending only what you can afford to spend.

5. Track all purchases. Save the receipts and keep a running total of expenditures so you can see how you’re spending is measuring up to your budget. If necessary, scale back on one category if you’ve tipped the scales in spending on another.

6. Shop sales and deals. High-end stores may have the impressive tag, but their prices can set you back. Instead, look for comparable gifts at discount stores and other retailers. Also, if you must use a credit card, use one that earns you a cash-back bonus for added savings.

A holiday budget is a must to avoid overspending and finding yourself in debt early next year.

The chance to give gifts and spend time with loved ones makes the holiday season a special time of year. But for many people, the holiday season often leads to overspending.

A 2016 survey from the American Research Group found that American shoppers anticipated spending an average of $930 on gifts that holiday season. Data from T. Rowe Price confirms that parents are spending between $400 and $500 per child each year. In 2015, CPA Canada conducted a random phone survey of 1,004 adult Canadians and found the average adult planned to spend $766 on holiday gifts.

Although these numbers can reflect an overwhelming sense of generosity, many times excessive spending is based on a desire to outdo gifting from the year prior – sometimes at the risk of personal finances. Some people are taking drastic measures to make holidays over-the-top, with some delving into emergency savings while others withdraw prematurely from retirement accounts. Budgeting for the holiday season can help shoppers keep their finances in check.

Determine spending patterns

An examination of receipts and spending habits from previous holiday seasons can help individuals establish budgets for the current year. Make a list of all expenses – even the ones that extend beyond holiday giving. These may include expenses such as gym service fees, homeowner’s insurance, traveling expenses, gift exchanges at work, and more. Extra costs can add up and should be factored into holiday budgets.

Try to recall if your spending last year felt comfortable or if you were paying off credit cards long after the holiday season had ended. If it’s the latter, resolve to make adjustments.

Establish a budget that fits

There is no such thing as a one-size-fits-all budget. Figure out if there is extra money this season or if times are tight. This will help you plan accordingly and avoid overspending. Shifting priorities can help free up some cash. If children are interested in this year’s hot (and likely expensive) gift, cut back on holiday travel or entertaining. Instead of buying gifts for coworkers, buy a drink during a night out.

Use the holidays as an opportunity to sell

Collectibles, gently used toys, video games, action figures – all of these items may be collecting dust at your home, but they might be coveted by other shoppers. Rely on the season for spending to make some extra income that can be cashed in for your own holiday purchases.

Set up an account and track spending

Establish a separate account strictly for holiday spending. This can include a credit card only used for gifts and entertaining or a savings account at a bank or credit union. You won’t know what is going out of your account unless you keep careful tabs on it. Tracking spending is the biggest key to sticking with a budget, according to the financial advice group The Balance.

Holiday budgeting can be challenging. But with some effort, it is possible to avoid debt and still enjoy a happy holiday season.