The holidays are often looked at as the season of giving, which also means it can be the season of spending. This can be, in equal measure, joyful and stressful. Creating a solid holiday budget and sticking to it is the best way to be stress-free during, and after the holidays - when all you are left with is bills, bills, bills. Here are five simple steps you can take to create a budget, and make sure that you don’t go into debt this holiday season, because there’s nothing joyful about that.
1. BRAINSTORM A LIST OF ALL YOUR HOLIDAY EXPENSES.
While gifts might make up the bulk of our expenses, they are not the only extra expense that comes up during the holidays. It’s important to remember all the other expenses like entertainment, food, special events, decorating, travel, wrapping paper, cards, and charitable donations. Do a deep dive, and make a list of all the holiday expenses that typically come up for you. No matter how big or small, things can quickly add up.
2. DECIDE ON YOUR SPENDING LIMIT.
Whether you’ve put money aside throughout the year for holiday expenses, started saving last month, or you are now just finding room in your budget for this special time of year, firmly decide how much money you have to spend. Once you’ve decided on your spending limit, assign an amount to each category (i.e. gifts, entertainment, wrapping paper, etc.). ’Tis the season for increased spending, so be sure to find other ways to cut back, like relying on more homemade meals, or skip that extra coffee run.
3. CONSIDER USING CASH.
Opting to use cash and/or your debit card, versus credit cards is the best way to avoid overspending and mounting debt levels. Cash is a bullet proof strategy to ensure that you are strictly spending within your means. However, if collecting points on your credit card is important to you, make it a point to only use your credit card for funds you actually have, then pay off each purchase right away.
4. MAKE YOUR LIST AND CHECK IT TWICE.
By making your gift list ahead of time, you will be able to plan how much money you will be spending on each person, and how it all fits into your overall budget. Give yourself options by jotting down 2-3 ideas within your price range for each person. This will help you avoid making any last minute decisions that could cost you while you are under the pressure of time, and crazy holiday crowds at the malls.
5. TRACK YOUR SPENDING AGAINST YOUR BUDGET.
As you make purchases, track every single one of those expenses. This will give you a clear picture, at any given time, of how your spending is tracking against your budget. If you don’t see how your expenses are adding up, it’s easy to underestimate what you’ve actually spent. Before you know it, $50 purchases here and there can quickly add up, and become $1,000 or $3,000. Tracking every expense will help you avoid any surprises later, and allow you to make changes, if necessary. Tracking your budget is the most important part of the budgeting process to ensure you stick with it. There are great apps that you can use to track these expenses such as Mint and PocketGuard. However, a good ol’ excel spreadsheet also does the trick!
What do you do over the holidays to make sure you stay on track financially?