Sticking to a Holiday Budget This Year

Dawn
Dec 1, 2022
Sticking to a Holiday Budget This Year

In spite of high inflation and economic uncertainties, the 2022 holiday season is expected to be a busy one. Holiday retail sales are forecast to increase 4-6% this year to reach over $1.4 trillion.

Shoppers have come to expect higher prices and are likely to do a lot of comparison shopping online in order to find discounts and deals.

Budgeting is more important now than ever

The best way to manage the pitfalls of inflation this year and avoid going broke is to start with a holiday spending budget. Even if you’ve never made a holiday budget before, there is never a bad time to start. It is an easy way to keep your spending in check and manage your finances efficiently so that you do not start off the new year with painful, unwieldy debt. It can also help you organize your finances generally by giving you a clear overview of where all your money is going so that you can make lifestyle adjustments as needed.

Steps to make a realistic holiday budget:

1. Make a list of holiday expenses. The typical expenses for holiday spending are travel, gifts, and food, and the costs for these can add up quickly. If there are any other expense categories that you expect, like holiday hosting, parties, decorating, or others, include those as well.

2. Estimate the cost for each category. Based on previous years, estimate roughly what you would need to spend to satisfy each expense category.

3. Set an overall spending limit. Regardless of what you would like to spend, state clearly how much you are comfortable spending. This amount is however much you’ve saved, plus the amount you are willing to charge to your accounts.

4. Designate a limit for each category. You have estimates of how much you’d like to spend on each category, but the sum of all spending must not exceed your limit. Reexamine each category and assign each one a revised dollar range that works within the overall spending limit. You may have to pare down the spending for each category a little bit, or you may decide to eliminate an entire category of spending altogether so that you have more cash for higher-priority expenses.

5. Make a list of people to buy gifts for. It can be helpful to break down your gift category with a specific list of people and assign each one an approximate dollar range, as well, so that your shopping is focused and you do not go overbudget on one person leaving too little for others.

Sticking to the budget is just as important

Having a budget is the first step toward proactive financial management during the expensive holiday season. But a budget is only a tool; it is only as good as the discipline it inspires. Actually sticking to the budget is the harder part, but it can be made easier if the budget is well thought-out from the beginning and realistic to your actual spending needs and holiday preferences. If budgets tend to get forgotten or disregarded in your life, consider some additional tips for sticking to the holiday budget and making it a useful tool that saves you money.

· Start early researching prices so that you know what to expect to pay for items. Not all deals on Black Friday and Cyber Monday are good ones; early research will help you identify a good deal when it comes along.

· Look for travel deals and use reward points to keep costs down

· Comparison shop online and sign up for email alerts for specific items when they go on sale

· Factor in shipping costs and look for “free shipping” whenever possible

· Build in a spending cushion for extra expenses that are likely to come up along the way, such as work gifts, secret Santas, tips to service workers, and charitable contributions.

· Track expenses. Entering your budget into a spreadsheet can help you get organized and remind you of spending limits on your holiday categories. Online budgeting apps are widely available to help you organize your budget even more precisely, categorizing your expenses and automatically syncing to your bank account in order to give you a real-time look at your spending. Tracking your spending will not only help you make adjustments as needed, but will help set you up better for next year so that you’re not starting your holiday budget over from square one.

The best advice is to plan early. The earlier you set your budget, the sooner you can start saving toward it. Tracking expenses this year will give you a clear road map next year so that you are better prepared for a stress-free holiday season.