Author: Tyler Nolan, freelance writer. Twitter: @t_nol
The holiday season is exciting, enchanting, and often expensive. But there are ways to celebrate the holidays fully without breaking the bank. Of course, the spirit of the season is giving, and with that comes the notion of spending money, sometimes seemingly unnecessarily to throw a good party or to be able to give great gifts. With a few smart budgeting strategies however, the season of giving can turn into the season of savings.
The first step in setting a budget for the holidays is looking into what exactly you spent during the last holiday season. Assuming your yearly spending is similar year to year in other areas, this can be a good spot to start when thinking about exactly how much to spend. Many financial advisors suggest spending no more than 1.5% of annual income on holiday expenses. This number may seem low, even selfish at first glance, but it actually works out to about $750 (assuming median annual income of $50,000). Depending on the size and relative distance between members of the family, this number could ultimately prove to simply be inadequate, but it is a good start. This number can be adjusted according to what was spent last year, along with money saved throughout the year specifically for the holidays.
Planning ahead can yield great results in terms of saving money. Last-minute shopping can be stressful. Prices get hiked up, stores run out of inventory, and the only way to get that most coveted gift is to pay top-dollar in an aftermarket sale with someone who—intelligently by some standards—bought out the last supply from the local stores (see The Office: Moroccan Christmas Season 5 Episode 11). Waiting too long to start shopping can undermine even the best of budgets, and it is crucial to get out and make sure all the shopping is finished in a timely manner.
Similar to buying gifts, planning ahead can help ease the stress of travel and holiday parties. If the holiday season involves large amounts of travel, it is beneficial to arrange the trip early. Last minute plane ticket prices are equally as inflated as last minute gifts. If traveling is something you know will be part of the holidays, your budget should certainly account for that as well. This might mean exceeding that 1.5% that is recommended, but family is worth it. If you’re planning a holiday party, it is wise to figure out how many people will be attending so you can provide an adequate amount of party favors without having too much waste left over. It is a fine line to walk and you should err on the side of caution, but a good estimate of the attendees can help determine exactly how much to spend on food and drinks.
Go digital! Online shopping comes with risks, of course. We’ve all heard the nightmare stories of identity theft, spending money on a site and not receiving the purchase, and of course having a package swiped right off the door step. All of these are legitimate worries, but there are safeguards against these things:
Digital shopping, for all of the perceived risks, has rewards that greatly outweigh the former. Often time’s online deals can save loads of money compared to shopping in stores. Sites will offer deals on a daily and weekly basis to encourage customers to purchase slow-moving items, and if some of these deals coincide with what is on the holiday shopping list, or even if there is something not on the list that would make a great gift, then pounce and reap the savings.
DON’T let your credit cards inflate your budget! Just because you can does not mean you should. It is not necessarily bad or taboo to use credit cards; they’re an integral part of modern life. However, be cautious that you do not lose track of exactly how much you’ve spent, and also be aware of how much debt you had on the card before you began shopping.
The holidays are supposed to be a celebration. Celebrations call for gifts, parties, and togetherness: and that can become costly. Building a strong budget to help guide your spending can go a long way to making sure these holidays are as joyous as possible. Following these simple strategies, along with some smart shopping will help make sure your wallet is as happy as your family is.