Have you started your holiday shopping yet?
Whether you’ve already started shopping, plan on hitting Black Friday sales, or are still procrastinating just a bit, one thing is certain: holiday spending can quickly become a budget buster.
But with a bit of careful planning, you can get through this holiday season without spending more than you can afford.
Here are six ways to plan and budget for your holiday spending this year.
The 6 “C’s” of Holiday Budgeting
- Create a plan: Before you do any shopping (or any more, if you’ve already started), get organized. Take a couple of hours to sit down with a pen and paper, Excel spreadsheet, or other tool of your choosing. Make a comprehensive list of expected holiday-related spending. Make sure to think beyond just gifts: include contributions to parties at home, work or school, charitable donations, gift wrapping supplies, seasonal celebrations, and anything else that you tend to spend money on in December. If you don’t have specific gift ideas in mind yet, that’s ok – at least write down the person’s name so you know to account for them in budgeting.
- Collect pricing information: Do some research to figure out how much each item on your list might set you back. Compare prices at different stores or for different brands of the same item. Make sure to look for coupons in the paper or online, take full advantage of deals on cash back sites, and include shipping costs in any estimates for online purchases. If you do not yet have a specific gift in mind for a person on your list, set a target price point for that person, and then look for gifts that fall within that target.
- Crunch the numbers: The next step is to figure out how much money you can afford to spend on holiday shopping. “Afford to spend” means the amount that you have saved for the holidays thus far, or any new income that is not earmarked for bills, regular spending, or long-term savings. It does not mean any amount you have to put on a credit card. We’re talking about truly discretionary funds – the money you might use to buy a new outfit or a few extra lattes in any other month, or throw into savings as “extra.” You can also look for places to cut your budget this month. For example, holiday party invitations might mean you eat at home less, and can get away with a smaller December grocery budget. Basically take your income between now and the end of the year, subtract necessary December expenses (be realistic!), and calculate the amount left over. Then add any previous holiday savings. This is the amount of money you have to work with. You should do this step without regard to your list in step 1 – the number you figure out in this step is what you have to work with, period. We’ll figure out how to reconcile it to your list in the next step.
- Compare costs to budget: Add up the items on your list, and compare the total with your available budget from Step 3. If you were planning to spend more than you have available, you need to revise your list. Either remove a few people/items completely or reduce the amount you were planning to spend on each. An alternative is to squeeze a few more dollars out of your normal spending to use for holiday spending instead. Repeat Steps 1-3 until the money in your holiday budget exceeds the amount of money you plan to spend. It’s helpful to keep a little cushion in case you forgot something or end up spending just a little more on “extras” like shipping or gift wrap.
- Control spending: With your list in hand, set out to actually purchase your items. Whether you physically go out shopping or choose to point-and-click your way through the holiday season, make sure that you are buying items on your list at or below the prices you planned for. If you buy something and find a better deal later, consider returning the first item if it’s not too inconvenient. Also remember that credit cards are NOT one of the 6 C’s on this list. Resist the urge to buy now and pay later – paying with cash is the only way to truly stay within your means.
- Conquer your budget: Keep track of every dollar you spend, and compare your actual spending against your original spending plan at least once every couple of nights. Make adjustments as necessary – nobody can be 100% accurate with your planning, and that’s ok. The key is to make adjustments in other areas to compensate. If you truly want to keep your spending in check, going over on one person or item will mean cutting back on something else. Consider this carefully before allowing yourself to spend more than you budgeted!
Having a realistic holiday budget is one way to reduce stress and keep your holiday spending under control – but it only helps if you have the willpower to stick to it! Starting early is one way to keep costs down – you have more time to look for deals, and can avoid the pressure of buying because you just don’t have time to wait.
It’s also helpful to have an accountability buddy – maybe you can share this post with a friend, and create your holiday budgets together. Then you can check in to make sure you are both sticking to your budgets, and support each other when one of you is tempted to stray. Whatever you do, remind yourself that the holidays will come again – you don’t have to buy everything this year!
What about you? How do you plan for holiday spending?