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Creating a specific budget for the holidays helps you reduce your stress levels and enjoy the season without worrying about money or January’s credit card bills.
If you prepare ahead of time, you can pay for the holidays in cash while keeping up with monthly expenses and staying on track with your financial goals.
Let this holiday season be the year you aren't regretting all those purchases after ringing in the new year!
Here are five things you can do to prepare for the holidays without wrecking your budget.
Create a Spending Plan for the Holidays
Everything starts with a budget. Decide now what you want to spend and how much you can afford for each of the upcoming holidays. You can create a general holiday budget, or set up a budget category for each holiday.
Holiday budget: $1500
- Halloween: $100
- Thanksgiving: $200
- Christmas: $1100
- New Year’s: $100
It's crucial to write your budget down. A budget is a goal for your money, and you are 1.5 times more likely to achieve a goal if you write it down. You can even make a budget for each thing or person on your gift list.
Your Christmas budget is $1100
- Dinner: $50
- Mom: $50
- Dad: $50
- Child 1: $150
- Child 2: $150
- Grandparents: $100
- Giving: $200
- Boss: $20
- Decorations & wrapping: $50
- Tree: $30
- Travel costs: $200
- Miscellaneous: $50
This is just an example, but you get the idea. A recent survey showed 31% of people go into debt, and 1 in 5 people dip into their emergency funds to pay for holiday giving and cheer.
Making a budget for the holidays will help you manage your finances and not overspend hundreds or thousands of dollars.
Plan for and Prioritizing Expenses
Part of preparing for the holidays is making a list and figuring out which activities you want to spend money on. A budget is simply prioritizing your money. Make a list of all potential activities and gifts, then list them in order of priority.
If you don't have the extra money for something, know that going into it. If you have a yearly tradition of traveling to grandma's house and it's a high priority item, plan for it in the budget.
List of holiday expenses and activities to consider:
- family dinners
- work parties and/or gift exchanges
- giving and donations
- festivals and entertainment
Then decide what is a must-do, should do, and would like to do. While buying and mailing holiday cards is a must-do most years, perhaps it becomes a would like to do this year.
Decide on a budget for each item and see how far you can make it down the priority list.
There may be things you can't afford to do. However, if you plan for items in your budget, they won't mess it up later.
If there is something you're afraid your family will guilt you into doing, just budget for it now. (Or learn to say no.)
If you can get out of it later, then put the money toward a different goal. It is better to be prepared than having to scramble to get the funds together later or using a credit card.
A budget is all about prioritizing your money. When preparing for the holidays, mentally and financially, it's essential to decide what's worth your time and what isn't.
Track Holiday Spending
Once you have your budget and priorities, you need to keep track of what you spend.
With Tiller, you can even plan your gift-giving and track your actual spending per recipient with their clever holiday gift planner spreadsheet.
Keep receipts for all of your holiday gift purchases too! If you need to return an item, it is easier to get what you paid for it back with a receipt. Otherwise, you may be issued store credit or even get a reduced price amount for your return.
If you usually use credit cards and struggle to stick with a budget or go into debt over the holidays, cash envelopes are a great way to stay on track and change your behavior.
You'll likely spend less than swiping a card because when you’re out of money, there’s nothing to spend.
Prepare Your Family
Let your immediate and extended family know ahead of time what your plans are for the holidays. Decide what activities and traditions you want to participate in, and be ready to explain that you can’t do everything this year.
You do not have to continue a holiday party or giving tradition that leaves you broke, tired, and stressed.
If you can't afford to buy everyone in the extended family gifts, suggest doing presents for only kids or doing a white elephant gift exchange, and suggest inexpensive holiday activities you can do together.
Start bringing it up now and see what your family is willing to do. Enlist their help in thinking up some new and unique inexpensive holiday traditions.
Then prepare your budget and shopping list for whatever gifting and holiday cheer activities everyone agrees to do.
Giving in Your Holiday Budget
Decide how you want to give back this year and put it in the budget. There are lots of ways to express generosity during the holidays, and they don't all require money.
You can make a significant impact with little or no money. Consider donating your time and energy to help a variety of causes.
If you want to give in more significant ways, decide now how much extra cash you can donate and put it in your plan. Brainstorm with your family ways to give back and get everyone involved.
Here are 6 ways to give back this holiday season for more ideas. Set a budget for giving and see how you can have the most impact with it.
Start Your Budget for the Holidays Now
Creating your budget now will make it easier to buy things on sale and get a head start on a gift list before the hectic holiday atmosphere arrives.
Start buying things a little here and there now to help reduce stress for the winter holidays and protect your budget. The more prepared you are, the less stressed you will be.
This will also limit trips to the store and dealing with the holiday shopping chaos. Every time you head out on a shopping trip, there's a chance you'll make impulse purchases or spend money you don't have.
The more you can control your spending and get things done ahead of time, the better off you and your budget will be!
You’ll Thank Yourself Later
Spend time in the early fall deciding what you want to spend over the holidays and what is a priority for you, your family, and your money.
The earlier you begin holiday budgeting, the more you'll benefit not just financially but emotionally too.
Deciding what you can and can’t afford now will help you later when it isn’t a struggle every time you think about the holidays over the next few months.
You can find plenty of ways to save money and avoid holiday debt while still having fun and experiencing some holiday treats!
The holidays are meant to be a joyous time spent with family. Remember the reason for the season and find some ways to enjoy each other without wrecking your budget or wracking up credit card debt.
Hearing favorite holiday stories or sharing your favorite holiday memory while sipping hot chocolate with your loved ones warms you in more ways than one and gets everyone in the holiday spirit.
You’ll thank yourself during the holidays and in the new year for considering your finances well ahead of time!
Article written by:
Ashley, a Women Who Money contributor and the owner of Budgets Made Easy. She was able to pay off $45,000 in 17 months. Now she helps people budget their money so they can pay off their debt. You can follow her on Facebook.