If you're like me, you grumble every year about the commercialism of Christmas… but then go out and spend lots of money on presents, decorations and party supplies. I know I'm not alone — according to one survey, Americans racked up an average of $1,054 in credit card debt over the 2017 holiday season.
But is “the most wonderful time of the year” worth going broke over? How can we do some budget planning for the holidays?
A lot of people wait until January 1 to start creating a budget. In the weeks leading up to the New Year, however, they spend money like the proverbial drunken sailor. Come to think of it, it's a lot like our holiday eating habits. We go hog wild and justify it by vowing to start our new diet as soon as the ball descends on Times Square.
Creating a budget to get you through the winter holidays will not only help you save money now, but it will also establish good habits that you can carry over into the new year. And it will also likely reduce the stress that many of us suffer from during this holly-jolly season.
So hold my eggnog while I help you make a simple budget for the holidays.
Step One: Make a List!
I love lists. Just the act of writing down what I need to get or do makes me feel calmer and more in control.
So before the stores start playing Wham's “Last Christmas” on repeat, grab a pen and a piece of paper and make a list of all of the expenses you'll need to account for. Yes, it will include presents for your friends and family, but also make sure to include other items that may not come to mind at first. Things such as a new outfit for the office party, tinsel for the tree or candles for the menorah. The money you intend to put in the Salvation Army bell-ringer's bucket is also part of the budget, and even the gas it will take to get you to Aunt Matilda's house on December 26.
Step Two: Decide How Much Money You Can Spend
OK, the goal here is to not go into debt to enjoy the holidays. Take a look at how much money you have in the bank right now — and how much you anticipate getting from paychecks, bonuses, etc. until your holiday spending obligations are over. Subtract your regular expenses, such as bills, mortgages, the usual grocery order, etc. Be completely honest with yourself here! The amount of money you have leftover will be what you can allocate for holiday spending.
Step Three: Assign Dollar Amounts to Each Item on Your List… and Stick to Them!
Now go back to the list of stuff you'll need to spend money on during the holiday season and allocate specific dollar limits to every item. You'll probably spend the most on presents, but don't forget any of your other spending categories.
As you do your holiday shopping, think of it as a game. Make sure you don't “cross the line”! Take advantage of holiday sales, coupons and other creative ways to save money on the things you intend to buy. Black Friday is an excellent opportunity to grab some huge deals, but don't forget about Cyber Monday, when you'll find fantastic buys online.
I am a big fan of using cash for a budget. I think it's too easy to go over my budget if I use a debit or credit card. I have three kids, so I'll take three envelopes and put my spending limit (the same for each kid) in them. If I have any leftover money, I'll hit the dollar store on Christmas Eve and pick up a few little stocking stuffers.
Next Year, Start Saving in January!
Of course, the most responsible thing to do is to start saving for the holidays in January. Every month, put aside a little money. Just $100 saved every month would give you more than $1,000 to spend when December rolls around!
I have a friend who buys a $25 Amazon gift card each month… for herself! When December rolls around, she uses the gift cards for toys for her kids. I think that's an excellent idea for sticking to a budget.
Of course, it's a great idea to maintain a budget year-round. Here at Investor Junkie, we've reviewed our favorite budgeting apps that can help make this a no-brainer process for you. We particularly recommend Personal Capital. This app takes into account your entire financial picture, including your bank accounts, bills, and investment portfolios. YNAB is also a great option to handle your budget. Here's a comprehensive comparison we've made between Personal Capital, YNAB and Mint.
Start planning for the holidays now. You'll find yourself stressing less and enjoying yourself more. As for dieting… well… I'm afraid I can't help you there!