It’s time to plan for the holidays. “Wait a minute,” you might think. ”School just started and Halloween hasn’t yet arrived! Why should I think about the holidays now?”
Without planning, the holidays, which I will define as the period of time from Thanksgiving through New Year’s, can put financial strain on families. When unprepared for the additional expense, many people overspend. They put purchases on credit cards to be paid off later with significant interest. This can make the holidays quite expensive and stressful. It does not have to be this way.
The first thing to do is to make a plan. Consider all the categories of expenses associated with the holidays. In addition to gifts, there are special foods, parties, entertainment, travel, charitable donations, etc. Make a list of all your anticipated spending categories and determine how much money you need for each one. For gifts, write down how much you will spend on each person. Total it up. This is the amount you need to save between now and the end of the year.
One source of money is your paycheck. Divide the total amount you need by the number of pay periods remaining this year. This is the amount you will need to contribute each pay check between now and the end of December. If it is too much, go back and reevaluate each category.
Another source of money is rearranging your current spending. If you can reduce one expense, you can earmark the savings for the holidays. Say you spend $40 each week for dinner in a restaurant. If you switch to dining out every other week, you could save $1,040 in 12 months. Eliminating a $5 daily weekday sandwich or specialty coffee can save $1,300 a year. Are you paying for services you don’t use or are under using? Consider eliminating that expense or switching to a less expensive plan. Finding one way to reallocate your money can go far in helping to cover holiday costs.
You can also reduce holiday expenses. Then you will need less money overall. Here are some ideas:
- Gifts: Can you give fewer gifts? With extended family, adults can draw names, or perhaps only the children receive gifts. Some people on your list might appreciate a gift of time. Agree to price limits.
- Decorating: You can find holiday decorations in your home and backyard. Use every day items in unique ways or add festive bows and ribbon. Check out second hand stores. Find creative ways to wrap gifts and reuse gift packaging. Magazines and sites such as Pinterest offer ideas.
- Entertainment: It is fun to go to the theater and attend concerts at holiday time. Can you find free performances? Consider other low-cost types of entertainment. You can go sledding or ice skating, watch classic holiday movies, bring friends or family together to bake cookies, drive around in the evening to look at holiday lights, or find a place to volunteer.
- Parties: Consider renting or borrowing a special holiday dress instead of purchasing it. Hold a pot luck. Throw a dessert party instead of a dinner party. Use costly ingredients, such as expensive meats, as side dishes. If you have freezer space, buy food in advance when it is on sale. Cook from scratch and use seasonal foods.
Saving for the holidays is easier when you open a dedicated savings account. You can have money automatically transferred to your holiday account regularly. If you fear you will raid the funds for non-holiday spending, make the account hard to access and don’t get a debit card.
Once the holidays are here, follow your plan. When you shop, stick to your list. Leave your credit card at home and use cash. Shop on a full stomach. Avoid opening store credit cards as they typically have very high interest rates. Use coupons, reward points and discount offers on social media.
It’s important to write down on paper every purchase and keep a running tally. While this is work, it helps prevent overspending. If you spend more than you planned in one category, reduce your budget in another.
Once the holidays are over, keep your special savings account open and continue to add to it each month. When the holidays roll around again, you will already have the funds.
Although it is early, I wish you Affordable and Happy Holidays!
This blog is published to provide you with general information only, and is not intended to provide specific or comprehensive advice. Money Care, LLC encourages individuals to seek advice from competent professionals when appropriate.