Start planning early and be decisive — tips to help you stay on budget during this joyous and costly time of year.
As we enter the holiday season, it’s all about joy, togetherness, and of course, significant spending. From travel expenses to gift shopping and attending endless celebrations, our credit card bills can be quite the fright come January.
However, here’s the reality: While you cherish this wonderful season, it’s crucial to stick to your financial limits. In fact, setting boundaries becomes even more vital as temptations rise. The secret to avoiding overspending is to create a practical and effective holiday budget.
Here are some strategies that can help:
Compile a gift list and monitor expenses in a spreadsheet.
Santa was onto something: making a list and checking it twice is vital. While we’d love to gift everyone, it’s important to evaluate what we can realistically afford. Budgeting expert Shirley Luu recommends jotting down everyone you plan to shop for and then taking a step back. Review the list the next day — this fresh perspective often helps identify who can be crossed off. After refining your list, assign a budget for each person; this will be your guiding figure when shopping, whether online or in-store. Luu also suggests including holiday events like parties and fundraisers on the same list to keep track of all expenses.
Remember: numbers are straightforward. Financial coach and radio show host Lynn Richardson emphasizes that budgeting is just math. “If your expenses exceed your limit, it leads to frustration and debt. Ensure your spending aligns with your budget,” she shares. With a flexible document, you can make adjustments — if you spend $5 extra on one person, reduce another gift by the same amount to stay on track.
Communicate openly with loved ones.
Relationships are invaluable, whether romantic or platonic, and expressing appreciation doesn’t have to come with a hefty price tag. For long-time friends and partners, you might find yourself out of gift ideas. CNBC personal finance correspondent Sharon Epperson suggests having honest chats about holiday gift expectations. This fosters understanding and allows for discussions about opting for heartfelt cards or planning quality time together instead. Engage in experiences rather than conventional gifts — treat someone to a concert or cook a meal together. This can keep costs down while creating lasting memories.
If you prefer traditional gifting, Epperson recommends organizing a gift exchange or Secret Santa. This is effective with friends and family and can also be practical in workplace settings.
Use credit cards wisely.
Accumulating credit card debt during the holidays can lead to financial stress later. However, using credit cards for cash-back offers or travel rewards can be a smart way to manage holiday expenses. Greg Mahnken, a credit industry analyst, notes that some cards provide bonuses for spending a certain amount within a timeframe or on specific purchases.
Stay mindful of the benefits. “Never spend more on credit just to earn points or rewards. Only spend what you can afford to pay off in full each month,” Mahnken advises.
If you've accumulated points or rewards that have gone unused, consider converting them into cash for shopping at various retailers. If you have travel-loving friends on your list, gifting a travel voucher can be a thoughtful and appreciated gesture.
Account for additional expenses.
When thinking of a ‘holiday budget,’ many jump straight to gifts. However, financial expert Jim Brown points out that gifts are just part of the total holiday spending. Additional costs come from special foods, drinks, decorations, travel, and accommodations. Planning for these extra expenses is essential. To gauge costs, review last year’s statements for informed budgeting this year.
Also, don’t overlook shipping expenses. If you can’t deliver gifts personally, ensure they arrive on time. Sara Skirboll, a shopping expert, highlights that many retailers offer free shipping during the holidays, and it might be more convenient to ship directly to recipients. “Mailing gifts can quickly add up, especially if you wait until the last minute,” she notes.
While it’s possible to bring gifts with you when traveling, airlines have tightened restrictions on baggage, making oversized luggage expensive. Shipping gifts directly to your holiday destination can save you from check-in headaches.
