The spirit of giving can turn the holidays into the season of splurging—unless you stick to a budget. It might be fun to indulge today, but it won’t be so fun to pay for it tomorrow.
The good news: You can stick to a holiday budget without sacrificing the fun of giving presents, decorating, entertaining and celebrating. Here are five ways to make it work.
1. Create a realistic holiday budget
“This may not sound exciting, but it’s the No. 1 way to make your holiday money stretch,” says consumer finance expert Kevin Gallegos, vice president of Phoenix operations for Freedom Financial Network. It doesn’t have to be complicated. Here are three key steps to follow.
Figure out what you can afford to spend. Many financial experts put the maximum budget at 1.5 percent of your total annual income, but Gallegos says the number will be different for each person. “It may be a standard percent of income or it may be a strict dollar amount.”
“If you want to be as realistic as possible,” compare the amount you planned to spend last year to the amount you actually spent, advises Katie Ross, Education and Development Manager for American Consumer Credit Counseling (ACCC), a national financial education nonprofit group. When you see what you planned to spend compared to what you actually spent, she says, you’ll be able to plan better.
Make a list. Try online printables like ConsumerCredit.com’s Holiday Shopping CheckList and Holiday Budget Worksheet, which Ross recommends, or use pen and paper, an Excel spreadsheet or whatever works for you.
List everything you anticipate buying this holiday season. And this means everything: greeting cards, post cards, and postage; decorations; entertaining, including food and drink, childcare; travel costs; wrapping paper, gift bags, bows, ribbons, tape and packing materials; and, of course, gifts.
Include everyone you plan to give a gift to and the amount you plan to spend on each person, Gallegos suggests. This includes teachers, doctors, neighbors and coworkers, plus year-end tips for newspaper carriers, postal service workers, babysitters, housecleaners, hairdressers, doormen and other service providers.
Don’t forget host or hostess gifts for parties, a few extra gifts to cover the unexpected, and minor purchases such as stocking stuffers. Even little things add up!
Compare and modify. Now compare your list to your budget. Does your budget cover everything you want to buy? Most people find their initial dollar amount is unrealistic, Gallegos says. It’s essential to either modify the list or your budget so you don’t set yourself up to overspend. If you can’t add more money to the budget, shorten your list now, before you shop. Could you spend less on gifts? Buy fewer decorations? Host less pricey parties?
If you do this right from the start, you’re more likely to stick to your budget.
2. Go online to save time and money
Use smartphone apps to save while you shop, suggests says Kendal Perez, a savings expert with CouponSherpa.com. “Download our Coupon Sherpa app for instant access to in-store coupons. This will help you save every time you shop because retailers are competing for your dollars,” she says.
Save money on gift cards by purchasing them at a discount, Perez adds. “Gift cards have topped holiday wish lists for nearly a decade,” she says. You’ll save whether you give them as gifts or use them to pay for gifts. Check Gift Card Granny, a comparison shopping site for discount gift cards, “to easily find the best deal on the cards you need,” Perez says.
Pay with rewards. Another way to stretch your budget without spending another dime is by tapping your credit card rewards stash, Perez notes. Use your reward points to buy gifts or trade points for gift cards.
3. Implement a shopping strategy
Plan your shopping route. “Instead of just heading to the store or mall to see what you can find, map out what stores to visit, in order, and what to shop for at each,” Gallegos advises. Do the same thing for online shopping.
Save on shipping costs by grouping online purchases to take advantage of free shipping offers, Ross suggests. “If you’re a savvy online shopper, wait until Cyber Monday” before you check out, she adds.
Shop when it’s convenient, not when you’re stressed. There is no single easiest or best time to shop, so pick a time that’s convenient for you and start shopping as soon as your budget is ready, says Ross. “Tackling the bulk of your shopping as early as possible will keep stress levels down. If you want to avoid crowds, stick to weekdays when most people are at work.” Keep a copy of your list in your purse or wallet, adds Gallegos. “When you see the right gift at the right price,” buy it, “check it off [the list] and stop shopping for that person.”
4. Use cash creatively
Don’t shop with your credit card, Gallegos says. “Studies have found that people spend 15-20 percent more on purchases paid with a credit card.” Use a debit card or cash instead.
Use large bills when you shop with cash. Larger bills can slow spending slightly because “people tend to hold onto large bills longer than small bills,” Gallegos explains.” Start out with a $50 bill instead of ones, fives and tens.”
Try the envelope system, says Perez. Tuck the money you plan to spend on each category into a separate envelope. Say you budget $100 for decorations. Put $100 cash in your Decorations envelope and use the cash in that envelope when you buy wreaths, ornaments or decorations. “This way you know exactly how much you are spending and you will never have to worry about your credit or debit card being compromised,” Perez says.
5. Give homemade gifts
Give of your talents. “People enjoy a thoughtful homemade gift because it’s from the heart,” says Ross. “If you specialize in jewelry making, sewing or baking, you should showcase those skills by using them as gifts.”
Give time and meaningful shared experiences instead of purchased presents, suggests Gallegos. Shovel a neighbor’s snow. Take care of his yard. Offer babysitting services. Gather friends or family together for an old-fashioned caroling party.
Make your own holiday cards. Cut holiday greeting card costs by sending electronic cards, many of which are free, Gallegos says. Or create and print your own cards. In school, students could make cards as a classroom project.
Wrap gifts imaginatively. Save on wrapping paper by covering gifts in recycled comics pages, old maps, bus schedules and other novelty items. Gallegos suggests wrapping kitchen items in a tea towel, or rolling bath and bed linens in a pretty sheet or shower curtain.
With so many easy ways to stick to your budget, you’re sure to have a happier holiday and worry less about what the January bills will bring.