Do you have anxiety or fear when you start thinking about holiday spending? Too many families go into debt each holiday. It adds unnecessary and unwanted stress to what should be a joyous season. It’s certainly no way to spend the holidays — no pun intended. So what’s the solution? Actually, if you start preparing for the holidays now you can enjoy a financially lower-stress season. Here’s how:
1. Become the Ghost of Christmas Past
Take a look at the past few years. How much did you spend? You’ll need to pull out old bank statements and credit card statements. Total the spending for the season. In addition to adding up the amount you spent on gifts, take a look at travel and dining expenses too. The average family spends around $700 on holiday gifts. That doesn’t include travel and dining. That doesn’t mean this amount should be your budget; rather, use it understand where you fall.
2. Take a Look at Your Future
Start making a list of the expenses you expect to have this holiday season. Make a list of all of the people you want to buy for and a list of the people you may have to buy for. Don’t forget teachers, coaches, and service providers. Also if you plan on traveling, start taking a look at flight and car rental costs right now.
3. Round Up
Once you total your anticipated holiday spending, round up. There are always some unexpected expenses that come up during the season. For example, your child may have a few holiday parties to attend which need gifts, or you may need to buy a new outfit for a work party.
4. Do the Math
Now that you have your holiday spending grand total, the next step is to divide the number of weeks you have between now and December 1st. For example, let’s say you spend the national average of $700 and you have 10 weeks until December 1st. That comes out to $70 a week.
5. Automate It
If your bank offers it, start an automatic withdrawal plan from your checking account into your savings account. Withdraw the weekly figure you came up with. In the example it was $70/week. Setting up automatic deductions makes it much easier to save. The money is withdrawn from your account regularly and you don’t have to worry about it. You know that once December rolls around you’ll have the money to spend and you won’t go into debt. This then allows you to use your credit cared if you can obtain cash back rewards or points, knowing that you will pay the bill off in total from the savings account.
What if the weekly deduction is more than you can afford?
If you are struggling to make ends meet before taking into account holiday spending, then you need to cut back on your holiday budget and get serious about finding an alternative way to show your appreciation that does not dig you into a deeper hole. Homemade gifts may be the best approach and you have time to get started on them now. For those costs you feel you still need to come out of pocket for, you can take a look at your household budget to see where you can make some temporary cuts or you can try to take on extra work to increase your income to cover the amount. For example, you might decide to go without cable television for a few months. It’s all about priorities.
You’re in control now and you have the knowledge to make the best financial decisions for you and your family this holiday season.