You can save money this holiday by scouring online deals and making homemade gifts, but a holiday budget plan will ensure you’re prepared not to overspend. Here’s your simple guide to creating a holiday budget that will keep you out of debt.
Know your starting point
Before you create a holiday gift list or invest any time into trying to determine how you’ll save money, review your monthly budget so you know your starting point. After you’ve subtracted all of your typical monthly expenses from your monthly income, how much can you afford to dedicate to holiday expenses? If the answer is “not much” it’s time to make a plan for how you’ll start to build create your budget, and build your holiday savings fund. This may include taking on a second seasonal job and/or slashing some unnecessary expenses temporarily so you can set aside more holiday cash.
Back into a budget from your list
Once you’ve identified your starting point for a holiday budget, decide how much money you’ll spend on each recipient and “task” on your list. Holiday cards, party decorations, wrapping paper and bows, ingredients for holiday cookies, secret exchanges, and extra tips for sitters, postal workers and all those helpers in your life all deserve a line in your holiday budget. If the total amount is far higher than you know you can afford to spend (or will never be able to save), figure out where you can make some adjustments–before you shop and realize you’ve blown your budget.
Recognize what is financially counterproductive
Sticking to a budget will help you avoid the many hidden costs that come with “off the cuff” purchase decisions. Before you’re tempted by discounts or offers that seem too good to be true, remember that they probably are: Opening a new store credit card to get a discount on your gifts, for example, will cost you a lot more than any percentage saved if you can’t pay the card’s balance in full when the statement comes in January. (Plus, opening new credit cards and charging more than 30% of your available credit line on a card could cause your credit score to lower temporarily). Even “buy one get one free” deals can cost you more than you save if it leads to you blowing your holiday budget, or buying things you don’t really need. Avoid overspending by taking only as much cash as you’ve budgeted. When it’s gone, accept that your shopping trip is over until you’ve found a way to earn or save more.
Plan to save consistently
You may not have time on your side if you’re budgeting for holiday shopping just a few weeks in advance of your gift-exchange, but you can make big strides with consistent savings. Designate an envelope for any amount of money you save with small lifestyle changes each day so you can visually see your progress, and know that you’re efforts are paying off. Once the holidays are over, keep the of saving something, anything, in your envelope each day. Next year when the holidays roll around, you’ll be more financially prepared with the savings you’ve built.