While the holiday season is filled with joy, giving, and spending time with loved ones, it’s also the most financially stressful time of year. With stores advertising more Black-Friday sales and Cyber-Monday discounts, it’s easy to get swept into the shopping hustle and bustle—leaving you and your finances exhausted.
With such temptations for impulse buying and spending beyond our means, it’s no wonder how holiday shopping can quickly accumulate high-interest debt. According to a 2017 holiday study by Magnify Money, “44% of shoppers racked up more than $1,000 in holiday debt, and 5% accumulated more than $5,000 in balances,” with 68% of participants using credit cards to cover these purchases. With these costly debts for one season, it could take 3-12 months to pay off your holiday expenses.
Best Holiday Shopping Tips
Try these four holiday shopping tips from the financial experts at Focus Financial to help you reduce your holiday-shopping anxiety and reign in overspending:
1. Set a Realistic and Comprehensive Holiday Budget:
The most crucial aspect of preparing for your holiday shopping is to create yourself a realistic budget that accounts for any potential and planned holiday-related expenses, such as:
- Gifts
- Travel & Trips
- Party Costs
- Extra Groceries & Essentials
- Work Gift Exchanges
- Postage and Delivery Fees for Out-of-Town Gifts and Cards
- Holiday Events
- Any Additional Holiday-Related Expenses You and Your Family May Have
To begin your comprehensive budget, it helps to determine your overall holiday spending budget. This total should only rely on disposable income you have (i.e. holiday savings from the year, monthly disposable income, etc.). It’s important to spend within your means to ensure you don’t dig further into debt to cover excessive spending on gifts, parties, etc. over the season. Once this total budget is set, stick to it, and be diligent and selective in your spending. We get into trouble when we continue to stretch the holiday budget.
Once you’ve determined the total budget, you can allocate funds to each holiday category. It’s important to prioritize your categories, in case you run out of funds to allocate, so you can make necessary cuts to non-vital holiday categories.
2. Keep Track of All Holiday Spending and Expenses:
Having a budget is only half the job; keeping a holiday-spending tracker will keep you honest, ensuring you stay within that budget and have an accurate idea of remaining funds for each spending category. It’s also a way to better prepare you “to more accurately budget next year,” according to TheBalance.com.
There are several methods to use to keep track of expenses, and it’s important you find one that works best for you and motivates you to stay on track. Here are useful options for expense tracking:
- Cash Envelope System: Take out your holiday budget in cash and allocated the funds into different envelopes for each spending category. There’s power in knowing exactly how much cash you have to spend on holiday gifts, etc. When the envelope is empty, you know there’s nothing left to spend; it helps to reign in overspending habits.
- Expense Register: If you aren’t interested or comfortable in carrying and paying with cash, a simple register system could work for you. You can keep a running register in a notebook you take with you or on your phone, so you can keep track of each spending category and deduct your spending from the category total as you make your purchases.
- Mobile Budget/Expense Tracking Apps: There are so many free and affordable budgeting app options that could also help with your holiday budgeting and tracking. Many of these apps allow you to make individual expense categories, allocate certain funds to those categories, and add/deduct your transactions. These are particularly handy because many of us aren’t usually very far from our smart phones!
3. Make a Shopping Plan of Attack:
Having a plan of attack for holiday shopping and expenses allows you to get the most bang for your buck in every holiday category and resist budget-tanking impulse buying. To create a plan of attack, set time aside to prepare and consider the following:
- Make Your Gift List Early – Who do you plan on giving gifts to this year? How much will you spend on each person? Once you’ve addressed these questions, you can list specific gift ideas you have that fits within the amount you set for them.
- Consider Giving Memorable, Priceless Gifts and Experiences – Santa knows to check his gift list twice, and we should be no different. It’s not always realistic to buy gifts for all the people we want to in our lives. Gift lists can be quite extensive—and expensive! Try thinking of less-costly alternatives for some—or most—of the people on your list to fit within your realistic budget, such as ‘make or bake’ gifts.
- Take Advantage of Money-Saving Opportunities – By shopping early, you give yourself more time to compare prices and find sales, coupons, promo codes, and discounts, which could save you serious money. With the extra money you’ve saved, you can put it into your savings or allocate the remaining for another gift or holiday category. If you aren’t easily tempted to overspend beyond your budgeted amount, consider also taking advantage of the cashback rewards many credit cards offer. Just ensure you pay them off immediately with the disposable income funds you’ve already allocated for those expenses, so you don’t accrue high interest debt!
4. Plan Ahead for Next Year’s Holiday Expenses:
To eliminate the stress of holiday budgeting in the future, it helps to start budgeting for it in the beginning of the year. This January, tally up how much you spent for the past year’s holiday expenses for all the spending categories. If you divide that total by 12, you’ll know how much money you’d have to budget each month to allocate funds towards that year’s holiday expenses. For example, say you spent $1200 in holiday expenses this year; for next year, you’d need to save $100 every month next to meet the same budget goal. This number is way more tangible and realistic than finding $1200 of disposable income at the start of the holiday season, and it’ll greatly reduce the anxiety and stress brought on by holiday finance management.
Manage Your Personal Finances with Focus Financial
For more money-management tips and financial-planning strategies, turn to the financial experts at Focus Financial! Our team of experienced independent financial advisors can help you create a comprehensive financial plan based on you and your family’s unique needs and goals.
Contact us today to learn more about our services or to find a financial advisor near you for a free consultation!
