From tips for holiday spending to advice on sticking to a budget, our holiday budgeting tips can help ensure your seasonal finances stay merry and bright.
A Time for Festive Fun — and Financial Worries
For most Americans, the holiday season is rife with reasons to rejoice, including abundant time spent with family, festive celebrations and a long list of spirit-lifting seasonal activities. But another prominent aspect of the holidays — the added spending that often accompanies “the most wonderful time of the year” — can often turn even the biggest celebrants of the season into finance-frazzled Grinches. Nearly six in 10 U.S. adults report that financial concerns create added stress for them during the holidays .
Managing Money-Related Stress With a Holiday Budget
Fortunately, though, by taking some steps to rein in our holiday spending and following a few tips for holiday budgeting, we can all lower the stress that often accompanies our seasonal finances. And one of the most effective ways to lower money-related stress during the holiday season is to create — and stick to — a holiday budget.
6 Steps to Creating a Holiday Budget
By creating a budget to determine how much you can comfortably afford to spend during the holiday season, the purchases you need to prioritize and the anticipated expenses you can cut back on, you can avoid overspending — and adding extra financial stress — during the holidays. To keep your holiday spending in check, consider taking these six steps to build a budget that won’t break the bank:
Step 1: Assess your expenses and income
The first step to creating a holiday budget is to gain a strong understanding of how much you’re making and spending each month — which can guide how much holiday-season spending you can afford. (And even better, if you can do this well before the holiday season sets in, you can make plans to start setting money aside early so you’re better prepared for the spending surge that usually accompanies the holidays.)
Take a close look at how much income you earn each month vs. how much you’re spending on unavoidable expenses such as rent, food, utilities and gas. Also examine your discretionary spending on things such as entertainment and “splurges” (while looking to identify any opportunities to cut back on these), along with any money you’re setting aside for retirement, college savings, emergency funds, etc. Use this information to determine how much you can afford to devote to a holiday budget without causing strain on your finances elsewhere.
Step 2: Consider last year’s holiday spending
Looking back at how much you spent over the previous holiday season and what you spent your money on can help you better plan your upcoming holiday-season spending and budget. When looking at last year’s credit card records and bank statements, try to answer questions such as:
- How much did you spend in total over the previous holiday season?
- Do you feel like last year’s spending total was too much, about right or has room to grow?
- Did you end the holiday season with outstanding debts that you had to catch up on in the new year?
- Did you spend on any unnecessary things that you might be able to avoid this holiday season?
- Has your financial situation changed since last holiday season? (Have you experienced any changes in income or expenses that you might need to account for in this year’s budget?)
Step 3: Set your total spending limit
After taking the steps outlined above, you should be in a good position to set a total dollar amount for your holidays-specific spending. A good holiday budgeting tip is to keep this equal to (or less than) your usual month-to-month discretionary-spending allowance. And whatever total spending limit you choose to set, make sure it’s an amount that you can reasonably afford without incurring uncomfortable amounts of debt or otherwise overextending yourself financially.
Step 4: List out your expected expenses
Next, make a list of all the holiday-related expenses you foresee that you’ll be spending on during the upcoming holiday season. Typical categories you’ll want to consider include gifts, travel, food, entertainment, holiday decorations and attire, and charitable giving. In each category, list all the purchases you envision, along with how much money you expect you’ll need to devote to each item and category.
Step 5: Identify areas where you can cut back
Now, take a look at all the expenses you’ve listed in the step above and compare your total projected costs with the total spending limit you’ve set for yourself. Especially if your projected spending total exceeds your spending limit, you’ll need to identify any areas where you can cut your costs, along with any expenses on the list that you might be able to eliminate altogether. (A previous Arthur State Bank blog article titled “8 Budgeting and Spending Tips to Save Money During the Holidays” offers some helpful insights on ways you can reduce your holiday-season expenses.) The process may involve making some compromises with yourself and dialing back your holiday dreams a bit, but by doing these things, you can prevent overspending and reduce your finance-related stress during the holiday season.
Step 6: Adjust as needed
At least some of the spending estimates made during the budgeting process will end up being off the mark — and the differences can be good and bad for your holiday-season budget. When you encounter cases where the items you’ve budgeted for turn out to be cheaper than you expected (thanks to sales and other savings opportunities, for example), it’ll give you extra money to devote to other areas or to things you might have had to trim from the budget. On the other hand, when you’ve underestimated costs or when surprise expenses pop up, you’ll need to make adjustments elsewhere to keep your spending total within budget. Either way, by having a holiday-season budget in place, you’ll be in a better position to take more control of your spending and avoid overextending yourself financially.
Tips for Sticking to Your Seasonal Budget
For your holiday-spending budget to be effective, you’ll need to do your best to stick to it. Here are a few tips for holiday spending and budgeting to help you this season:
- Track your holiday spending closely – Whenever you make a holidays-specific purchase, add it to your running spending total — and deduct the cost from whatever amount you have left in your total holiday spending budget. Keeping a running tally can help you know exactly where you stand with your budget and help you keep your spending on track. (And by providing real-time account access and updates, modern tech tools like digital banking and mobile banking apps can make keeping track of your spending easier.)
- Make needed adjustments as you go – As discussed above, after creating your budget, you’re likely to encounter unanticipated expenses — and savings, too — along the way. When it happens, be sure to revisit your budget and make any needed adjustments so you can stay on track.
- Seek out the deals – When it comes to finding holiday savings, a little extra legwork can often go a long way. To cut costs on gifts, make sure to take advantage of big holiday sales such as Black Friday and Cyber Monday, which many consider to be the kickoff of the holiday shopping season and can deliver some of the biggest savings of the year. Also, be sure to compare prices before making (especially your biggest) seasonal purchases, and check around for any available coupons or other discounts before buying, too.
- Be careful with credit – While it can be tempting to put your holiday purchases on a credit card and worry about paying for them later, this is also an easy path to carrying debt into the new year. Make sure to be wise with your credit card spending during the holiday season. And especially if you have a habit of overspending when using a credit card, consider using cash or a debit card for your holiday spending instead — so you’ll avoid the temptation to spend any funds that you may not have in hand.
- Carefully consider the terms and conditions – Alternative purchase offerings such as buy now, pay later can sometimes seem like a great way to get the items you need now and worry about paying for them later — but they can often come with conditions such as the potential for penalty fees or added interest when payments aren’t made on time. If you do choose to use such payment methods, carefully review and understand all the terms and conditions before making the purchase, and make sure you’re in a position to make on-time payments when they come due.
Proudly serving South Carolina since 1933, Arthur State Bank offers accounts and services to meet a variety of financial needs. To help you achieve all your financial goals, the bank offers in-person service as well as a range of convenient digital solutions. To learn how Arthur State Bank can help you with banking needs ranging from checking and savings to retirement accounts, mortgages, other personal loans and more, visit arthurstatebank.com.
