How to Set a Holiday Budget and Stick to It

The holiday season is a wonderful time of the year for many families across the United States and all over the world. Although certainly fun and festive, it’s also an expensive time of year that’s exacerbated by shopping frenzies. Record-high inflation and a tight economy can make even the jolliest people want to say, “Bah humbug!”

Since 2009, American consumer spending on holiday gifts and other holiday expenses has steadily increased over the previous year. Throughout December, holiday sales events bring the promise of steep discounts and big savings, but they’re intended to make shoppers spend far more than they initially planned. 

When you’re already burning a hole through your finances, enjoying the holidays and staying within your budget is hard. 

Holiday shopping can have a significant impact on your annual expenses, making it crucial to make wise choices that won’t leave you in a financial bind. By properly budgeting for the holidays, you can fully immerse yourself in the spirit of the season and the joy it brings. With the help of these expert tips for holiday spending, you can effectively stick to your budget and avoid any money-related stress during this festive time of year.

  •  Set a budget for each person and stick to it.

The best approach to meeting your budget is the simplest one of all: Before you start shopping for the holidays, sit down and make a strict budget for how much you’re allowed to spend. Look at your finances and make sure it’s a number you can comfortably manage.

Many parents understand the challenge of ensuring they spend about the same amount of money on each child. But then you make an impulse buy for one kid and feel like you need to buy something else for the second, then spend too much on that item and buy something for the first child to compensate – and, before you know it, you’ve blown past your overall holiday budget. 

The best way to overcome this challenge is to set a budget for each person you’re buying gifts for – and then don’t go over. Gift-giving is about the thought and sentiment, not the price, so resist the urge to overspend. Ask family members to agree on a spending limit for holiday gifts. You can also suggest a Secret Santa, white elephant, or similar type of exchange to reduce the number of gifts each individual has to buy while ensuring fairness about the number of presents each person receives.

  • Do your best to avoid impulse buys.

Stores are designed to tempt you to buy more than what you came in for – especially during the holidays when retailers are trying to convince you that a sale item is not only a value but also something you just have to have. Online retailers aren’t any better and will bombard you with emails and sales notifications sent right to your smartphone. 

If you’re following a holiday budget, impulse buys can quickly wreck it and leave you with big bills come January. Stick to your list of the presents you want to get, and if you do see an unexpected present that is too good to pass up, buy it in place of something else you were planning. Don’t focus on the amount you’re saving on holiday deals. Focus on what you’re spending, and be willing to make tough decisions to stay within your budget.

  •  Start shopping as early as possible.

Why wait for Black Friday to start finding great gifts each year? You can always scour ads and online deals for the cheapest option. With extra time to bargain hunt, you can hopefully land a better deal than if you wait until the last minute.

Consider keeping a running list of ideas for presents throughout the year and jotting down items your friends and family mention in passing. This way, when the time comes to buy something for a loved one, you’re getting them a gift they wanted and perhaps didn’t expect to receive. 

  • Shop around for the best deal.

Although you shouldn’t set your holiday budget expecting to find big discounts for the items on your list, deals, and sales items can stretch your budget further. You’ll feel better knowing you aren’t spending as much, or you won’t feel guilty if you do make an impulse buy. 

Of course, going from store to store hoping to save a few dollars puts you at risk of buying things you don’t need. Be sure to do your research on prices and consider online retailers that might have better offers.

  • Opt for homemade and handmade.

If your holiday budget turns out to be tighter than expected, consider alternative types of gifts that are easier on your budget and often more meaningful than something from the store or Amazon. 

The possibilities for homemade gifts are unlimited! Make a holiday ornament or decoration, bake a tin of cookies, or even offer to take a friend out for dinner after the holidays. In many ways, these gifts are more appreciated and memorable than a store-bought present. 

  • Use promotional APRs and interest-free payments for holiday purchases.

If you have a retail credit card or are making large purchases during the holidays, you may be able to take advantage of promotional APRs or interest-free payment plans that let you spread out holiday spending over 3-6 months – if not more. 

Keep in mind that this can be a risky strategy unless you’re certain you can pay off the debt over time – otherwise, you could get back-charged for interest applied over the entire repayment term. But these promotional offers can be cheaper than racking up credit card debt, and, in some cases, you can use the installment plans to benefit from smaller payments without paying a penny of interest.

  • Give the gift of experience.

There are many ways to celebrate the holidays that don’t require big spending; attending (free) local events, winter festivals, light displays, volunteer opportunities, and parades. This could also include low-cost holiday activities that give kids a memorable experience, such as baking, crafting, playing board games, and spending time outdoors. Remember, for many people, experiencing the holidays with loved ones is what makes this time of year great – not necessarily the presents you give or receive. 

Holiday budgeting doesn’t have to be a headache! After the holidays comes a bit of a financial hangover: getting your normal monthly expenses back on track. When you budget for the holidays, also budget for the first couple of months that follow so you don’t find yourself in a sticky situation. 

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