Amy Miller, AFC®
As the holiday season is in full swing, gift-giving may be on your priority list. The holiday season marks the busiest time of year for shopping and costs can quickly add up – and even get out of control if you’re not careful.
Many families are already struggling to make ends meet and the added stress of the holidays can prove to be difficult to navigate. This can lead to increased worry, anxiety, and depression.
Here are a few tips you can use to enjoy the most wonderful time of the year without breaking your piggy bank or adding to the stress of the season.
Set a Spending Budget Early & Stick to It
On average, Americans spend $641 on gifts each year and more than $350 on things like food and décor, according to the National Retail Federation. With all the enticing deals and new gift ideas on the market, it’s easy to spend, spend, and then spend some more during the holidays.
A great way to control your spending is by having a solid budget in place and sticking to it. Start by looking at last year’s expenses. Knowing what you spent will help you get a good grasp on what you can (or can’t) afford this year. Creating categories that have spending limits set for each is a great way to determine what is feasible for you and help you avoid overspending.
Avoid Holiday Debt
Holiday sales are projected to reach $960 billion dollars this year and according to a recent survey by US News, close to 42% of Americans plan on going into debt to cover their spending.
According to non-profit DebtHammer’s recent holiday spending survey, most will turn to a credit card, 13% will use a Buy Now Pay Later plan while others will use payday loans, personal loans, and payroll advances to finance the season. Around 3% state they will have to skip a bill to have funds available for purchases.
Not only can too much holiday debt harm your overall financial well-being and future but can directly impact your stress levels and mental health. The burden of holiday debt typically outweighs the benefits of it and leaves most struggling to pay for several months afterward.
After setting a budget, having a spending plan in place is the next best way to avoid holiday debt.
- Make a list of everyone you need to purchase a gift for
- Set the budget for that gift and list a few ideas that fit
Having a list and thinking about needs over wants will help you spend more responsibly.
Shop around for deals online and plan any trips to the mall ahead of time to avoid the temptation of browsing store after store and getting caught up in the moment. Always look for discounts on social media as well – stores will often offer deals exclusively to their followers.
Other tips include:
- Gift exchange
- Skip dinners out at a restaurant, host an “old-fashioned” potluck instead
- Take 24 hours to think about a purchase before you make it
Overspending during the holidays is just not worth it. According to a moneygeek.com survey earlier this year, 40% of Americans that took on holiday debt last year were still struggling to pay it off months later and around one-quarter of them state that they regret their spending.
We all want to make our loved ones happy, but we must be realistic and not leave ourselves starting the new year off in a bad financial situation. And it’s the thought that counts, right?
Start a Sinking Fund & Save
Starting a sinking fund is a great way to save money for specific purchases. A sinking fund is a savings account that you can use to put aside funds each month with a particular purpose in mind. This fund can help you be more deliberate with your funds.
You may think it’s too late for that this year but it’s NOT! Although you may not have all year to save for this year’s purchases, it’s never too late to start a sinking fund savings account. If you want to start now, you could move your budgeted holiday funds to this new account and use it to make this year’s purchases. This can help you control what you spend this year and give you a fresh start in January. In January, you can transfer or deposit money into this account for next year’s holiday season!