It's always important to understand that you should never consider holiday spending as an essential part of living costs. Gifts are not the only way to acknowledge gratitude or appreciation for a loved one in your life. Of course, don’t skimp on gifts if you can help it, but be practical about it. If you can afford gifts for every family member and close friend—while not falling into debt—that’s great. If not, consider resourceful alternatives like giving baked goods, handmade crafts or a gift for the whole household, instead of every individual.
Coming up with a holiday budget is often the last thing people want to do. However, staying motivated with an easy-to-follow budgeting plan for the holidays can drastically reduce your stress. The key to any effective budget is to keep it simple: plan out what you need, limit overspending and give yourself plenty of time to research the best deals. Here are six crucial budgeting tips to help you make a realistic budget and stick to it!
1) SET A LIMIT AND STICK TO IT
Take an honest look at your finances and come up with a dollar limit. For example, let's say you want to limit yourself to $500 for your total shopping bill. You might want to use $300 cash/debit this month and charge $200 with a credit card, aiming to pay it off by February next year. Leave at least a $50 - $75 money cushion for extra expenses. This is a realistic budget and will prevent you from overspending as long as you stick to it. Feel free to use a budget template and work off that as well. We have one with specific categories for the holidays.
2) PRIORITIZE YOUR LIST AND SET A GIFT LIMIT
Of course, everyone you're shopping for is equally important and deserving of a thoughtful gift this year. However, you need to make this work for you. Using the same $500 limit previously mentioned, break down the cost of gifts you have bought or will buy and make sure all the names of your recipients are included next to the cost. Aim for $425-450, to account for the tax and/or shipping costs. If you see yourself already going over $500, rethink some of the gifts. Go for being thoughtful over generous to a fault.
3) HAVE A PLAN BEFORE YOU SHOP
You may have already bought a bunch of gifts on Black Friday or Cyber Monday. But before you go out to shop again, take the time to research the stores and items on your list. Know what deals the stores offer prior to your visit. Compare online prices to in-store prices, and print out online coupons and promo codes from retailers’ social media and websites. Stay organized by making a specific list for each shopping trip and compare with your master list.
4) BRING YOUR SHOPPING LIST ARMED WITH COUPONS
Bring your store list with the dollar limits next to each person. Make sure you bring any in-store and online coupons and stay focused on your list. If you see something you just can't pass up and it is not on your list, let it go until you have finished shopping from your list (beware of impulse buying). Once you have completed your purchases, if the item you saw is still there and within your budget, only then should you allow yourself to purchase it.
5) USE GIFT CARDS TO HELP YOU STAY ON TRACK
Gift cards are a terrific way to stay on budget. The advantages are endless: they’re safe bets for friends or family, they’re quick to get, there are many to choose from and the amount you put on the card is up to you.
6) GIVE YOURSELF ONE $50 SHOPPING SPREE DAY
The best way to stay motivated and stick to your budget is rewarding yourself with a one day $50 shopping spree at your favorite mall or retailer. In order for this to work effectively, only bring $50 in cash. Leave your credit cards and checkbook at home. This will relieve some of the holiday budget pressure, and make you feel good about yourself. You will want to do this after you have finished your holiday shopping as a reward for sticking to your plan. Enjoy this day, have a piece of cheesecake, leisurely walk through the mall and treat yourself!
SOME FINAL TIDBITS TO KEEP IN MIND
Look at your situation honestly and make realistic goals without jeopardizing your finances. Plan every shopping trip: know what you want, what's on sale and stick to your list. Avoid impulse purchases, by giving yourself a few days to think about them. Using a combination of cash and credit will help prevent overspending, but always pay your credit card balance as soon as possible to avoid interest charges. Happy gift giving!
Spencer Tierney, NerdWallet