The holidays can cause even the most frugal people to blow their budget. Between gifts, decorations, food, entertainment, travel, and other costs, it is very difficult to avoid overspending for the holidays. However, the last thing you want to do is start next year with substantial bills that you may have trouble paying off. While you don’t want to feel like a Grinch, taking some practical steps can help you better manage your finances so you minimize your stress in January when it comes time to pay up.
- Create a realistic budget. First look at what you spent last year under each category of expense (gifts, food, travel, etc.). Consider whether those expenses were all necessary and how they affected your finances this year. Then look at your current personal finances. How much can you comfortably afford to spend during the holidays? Keep in mind that if you can’t pay your credit card bill at once, you will be paying significant interest on those purchases. Now, set a specific dollar limit for each category of expense. For gifts, set a price limit per person.
- Consider alternative types of gifts. Homemade gifts are a wonderful way to show you care without spending excessive amounts of money. For example, knit a scarf, bake cookies, or create a photo book. You can also gift an activity that you can do with your loved one or offer a service like babysitting or home repair. These gifts can be far more personal than something purchased in a store.
- Shop around for deals. Most people focus on Black Friday, Cyber Monday, Amazon Prime Days, and so on. However, many everyday deals can be just as good, especially if you compare prices at different stores online. You can further take advantage of this if you plan ahead and buy big-ticket items at the right time of year when they go on sale.
- Avoid impulse purchases. Have a shopping list whether you are buying online or in the store and stick to it. Don’t get distracted by sales, ads, and emails trying to get you to purchase things you don’t need.
- Discuss spending limits with family members. Maybe everyone is willing to bring a dish to the holiday dinner to spread the cost out. Or you can all agree on a maximum dollar amount for gifts or limit the number of gifts by having a Secret Santa-type exchange.
- Keep track of spending. It’s hard to know whether you are staying within your budget if you don’t monitor what you’re spending. Mobile banking and budgeting apps can help with this or just use a spreadsheet.
- Think ahead. Don’t you want to avoid unnecessary financial stress in the new year? By sticking to a budget, you can start the new year on solid financial ground.
With careful planning, you can enjoy the holiday season with your loved ones without overspending.
If you need assistance with creating a budget or managing your daily finances, contact me for a free consultation.