Whether you’re ready or not, the month of December will soon be here. For most of us, that means lots of expensive gift giving and costly entertaining. Some people plan ahead by shopping for presents all year round. Others have budgeted and saved methodically for the season.
But if you’re like most, you’re probably getting stressed out just reading this article because you dread the upcoming expenses of the holiday. You may even be wondering how you are going to come up with the money
. If that’s the case, here’s a strategy to plan your holiday spending now and make the year-end a little less bumpy.
MAKE A LIST OF EXPENSES
Put together a list of everything you will need to spend money on that is specific to your holiday. Of course, that means making your typical list of who you’ll buy gifts for, what that gift is, and how much it will cost. But, you should also include any parties you will be attending or hosting, and the costs associated with them. Don’t forget about any costs associated with events at work and the kids’ schools, charitable contributions, and toys for the underprivileged that you may typically buy. Keep in mind wrapping paper and holiday décor, as well. Total everything up and label that amount your Holiday Need.
CREATE A HOLIDAY FUND
Open up a completely separate account at your bank or financial institution that you’ll use solely for this purpose. This helps you to easily track your savings progress and keeps you from overspending as well.
MAKE YOUR INITIAL DEPOSIT
The amount of your first deposit will depend on your financial circumstances. Determine how much of your current savings can be earmarked for your holiday expenses. If you already have saved enough for all your expenses, go ahead and transfer it all into your new account. If you have not yet saved a dime, deposit what you can.
BUDGET FOR YOUR SHORTAGE
Subtract the amount of your initial deposit from your Holiday Need (as calculated in the first step). The resulting amount is your Holiday Shortage. Next, divide your Holiday Shortage by the number of pay periods left between now and the date you want to have your shopping done. Commit to funding your holiday account by this amount of money from each paycheck.
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RE-EVALUATE IF NECESSARY
You may find that you just cannot afford to spend the amount calculated. If so, go back to your original list and determine ways to cut your expenses. You can either buy presents for fewer people, buy less expensive presents, or both. If that doesn’t do the trick, try temporarily cutting your everyday expenses. For example, give up dining out at restaurants a few times. If that still doesn’t work, then you have no choice but to cut your holiday expense list. Remember, the holidays are about spending time with family and friends; not gifts. Whatever you do, though, do not finance your holiday spending by using credit cards or funds earmarked for other goals.
STRATEGIZE
Once you finish the budgeting, it’s time to create your spending strategy. Make a list of when you are going to buy each item. Search the Internet to find out if the items you intend to purchase are going on sale, and when. Don’t be afraid to buy online if the prices are good. You’ll save time and gas, and it may even help avoid impulse purchases.
WRAP IT UP
If you happen to have any unused money in your holiday account once you’ve purchased everything on your list, you’ll need to decide what to do with it. Consider either paying down a high-interest loan or credit card debt, if you have any, or leaving it in your account for next year.
PLAN AHEAD
Starting in January, begin planning for your next holiday season. Repeat a similar budgeting strategy. Obviously it’s too early to decide for whom you are going to purchase a gift, and exactly what you’re going to buy and what the cost will be. Just do the best you can for now; you may re-evaluate and fine tune things later on.
