When it comes to holiday spending, waiting in store lines all night and jostling for discounts will mean very little if you don’t have a budget that shapes your finances year-round. With the average U.S. household spending $600-$700 in 2014 for the holidays, putting that money together shouldn’t be a game of chance. Here are some tips to get it right:
1. Before you make a list, plan. How’s your debt? Do you have an emergency fund or any savings put aside? Start the holiday season by getting a handle on what you owe and what you’re spending day-to-day. Then plan a holiday budget (www.practicalmoneyskills.com/YourHolidayBudget) as early as possible that allows you to spend wisely.
2. See what spending is really necessary. It’s tough to cut young kids off a gift list, so turn to the adults. If your finances are limited, it’s worth asking adult friends and family members if they’d consider a gift swap or forego gifts altogether. They might actually think it’s a good idea.
3. Attack your everyday expenses. Want to afford the holidays? Consider evaluating some expensive habits. Try reducing the amount you are spending on expensive nights out. Cook at home and bring your lunch to work. Use public transportation. Compare and cut your auto and home insurance premiums. Turn down the thermostat, dump magazine subscriptions, gym memberships and any other budget item you’re not using. You’ll find that savings build quickly.
4. Browse before you buy. Assuming you’ve made a tight gift list, create a gift budget (www.practicalmoneyskills.com/YourGiftLog) tracking precisely what you’re willing to pay for every item. For must-have, non-negotiable gifts, you may have to pounce before Thanksgiving Day and Black Friday and Monday for both price and selection. Also, don’t forget to budget for holiday entertainment www.practicalmoneyskills.com/EntertainmentPlanner). It’s a potentially huge cost. Plan ahead and don’t waver.
5. Create your own Holiday Club. Online savings and money market accounts can allow you to set aside your holiday budget in small amounts throughout the year and they’ll pay better rates than the last few banks offering Holiday Club savings accounts.
6. Watch gas and shipping. Smart shoppers weigh the value of store trips versus online shopping. They also keep an eagle eye for advertised online and shipping discounts. Sign up for special deals and coupons, consolidate in-person trips to stores and make sure you review return policies at online and bricks-and-mortar stores before you buy. Paying return fees or missing a window to return a gift entirely can cost big money.
7. Keep good records. Whether you track your finances on paper or on a computer, develop a system that allows you to match your holiday list to what you spend every year. Good recordkeeping not only allows you to track the numbers, but also prevents you from duplicating gifts or overspending year to year. And it’s always a good idea to keep a list of what you get from others to make sure you’re thanking people appropriately.
Finally, consider whether it’s worth making new holiday traditions that go beyond gift giving. Some families consider contributing throughout the year to a joint vacation or reunion fund to bring everyone together. You might also consider the needs of aging or needy relatives who need assistance with chores, transportation or pet care. The holidays are what you make them.