The holiday season may be joyous for most, but it is still a stressful time for many of us. To no one’s surprise, much of the anxiety is caused by the sheer expense of the holidays. Gift-giving, entertaining, attending celebrations, decorating the house in cheer and traveling to spend the season with family and friends all make the season special, but if not planned for, could pile on debt.
According to a post-holiday survey by MagnifyMoney, Americans added on average $1,054 of holiday debt last year, a five percent increase from 2016. That is a striking total for a single annual event, and a great way to sap some of that festive spirit.
The holidays may still seem far away, but Black Friday will be here before we know it and planning ahead can help all of us avoid entering the new year with a mountain of stressful, new debt.
A great place to start is to create a budget and commit to sticking to it through the entire holiday season. This is easier said than done, of course. But succeeding with keeping to a manageable budget does help take some of the fear out of the holiday season.
Rather than a list of who has been naughty and who has been nice, start with a list of expenses that are sure to come this holiday season. Gifts make up a significant portion of any itemized list of holiday expenses, and you should include everyone who you expect to buy a gift for on your list.
More than that, though, take an honest accounting of all the cards, wrapping paper, office gift exchanges, travel expenses, decorations, donations or any other holiday-related expenses you expect to incur this year. This includes the holiday meals we eat. If you are hosting, create a menu and make a targeted shopping list that will help you not overdo it at the grocery store.
Next, determine a realistic spending limit that will be enough to cross everything off your list while helping you to avoid any post-holiday debt. Use your financial institution’s budgeting software to help you determine a realistic spending ceiling. Knowing exactly what you can and cannot afford is the very reason why budgets are a crucial ingredient to financial health, not just during the holidays, but any time of year.
Once a spending limit is set, it’s time to assign the money across your list. Assign a dollar amount for each gift you expect to buy and each expense you expect to incur. Prioritize your spending, being sure to set aside enough money for the friends, family, and events that matter most to you.
Get the most from your budget by cutting costs along the way. Have gifts shipped directly if possible and shop early if you can to avoid any panic purchases that blow up your budget. Consider upcycling or crafting personalized giftwrap and tags, and even making them part of your family’s tradition. Shop Black Friday, Small Business Saturday and Cyber Monday sales to get the most from your budget. But avoid letting a good sale goad you into any unnecessary purchases, including purchases for yourself.
In the end, value thoughtfulness over extravagance when considering a gift, and never feel pressure to buy a gift that does not fit within your budget. Be honest with your kids to ensure that their expectations are in line with your budget, too.
Speaking of cutting costs, one way holiday budgets get out of control is in the spontaneous purchases we make along the way. For instance, it’s easy to rack up an unexpectedly high food bill if you choose to end a day of shopping with a pricey lunch or a night out. The convenience of eating out is hard to resist, but a home-cooked meal will in most cases save you money.
In the end, we all want to be giving during the holidays. But being realistic about how much the holidays will cost and how much you can afford to spend is a key to a less stressful holiday and a great start to your financial new year.
