10 Tips to Prepare Your Finances for the Holidays
- Prepare for the holidays by creating a budget including all your holiday expenses.
- Impulsive purchases can quickly ruin a holiday spending plan and leave you with a mountain of debt to pay off in the new year.
- A healthy financial life requires that you keep your holiday spending under control.
When shopping for the holidays, the excitement can make it easy to overspend. But you don’t have to break the bank to celebrate with family and friends. Proper money management skills will help you to stay within your budget and avoid reaching the limit on your credit cards.
A Deloitte study showed the overall holiday spending in 2022 is expected to match 2021 levels at $1,455 per consumer. However, you can avoid debt or overspending by preparing a holiday budget ahead of time. Below are ten helpful tips to stay on track with your budget during the holiday season.
1. Create Your Holiday Budget
Holiday expenses are more than buying presents for loved ones. Most holiday expenses include food, beverages, decorations, gift-wrapping supplies, shipping costs, and much more. Unfortunately, small expenses can often lead you into big debt.
You can create a budget that works for you by getting specific about your holiday expenses. Here are two steps to determine what to include in your budget:
- First, determine how much money you have to spend before going shopping.
- Consider big purchases first to ensure that you allow yourself the right amount of wiggle room for smaller purchases.
- Decide where you are going to pull your money from. For example, did you create a sinking fund specifically for holiday expenses? If so, you should take money out of your savings account rather than your emergency fund.
A successful budget won’t deter you from the joys of holiday shopping. But conversely, it will help to avoid overspending.
Recommended Read: 7 Ways to Save Money During Christmas
2. Create a Sinking Fund
To avoid offsetting your budget, you should create a sinking fund. At the beginning of the year, set aside money from each paycheck to prepare for holiday spending. A sinking fund can help you financially prepare for buying holiday items.
3. Create a List of Giftee's
Create a detailed list of who is receiving what after you have set a budget for your holiday-related expenses. There should be a set monetary limit for each person on your list. This is a great tip for parents, mainly to ensure that each child receives a roughly equal gift to avoid the perception of favoritism.
4. Shop Smart
Look for Discounts
While you shouldn't plan your holiday budget with the expectation of finding significant discounts for the things on your list, deals and sales items can help you make the most of your money.
Shop Online
Use the internet to shop and compare prices to reduce the risk of buying things you don’t need.
Trade an Expensive Gift for a Frugal One
If an item is consistently more expensive than you anticipated, consider whether your friend or family member would be equally pleased with a different, more reasonably priced gift.
New Member Sign Ups
Take advantage of new member sign-up deals when shopping online. Also, download a coupon extension to your browser to help you find the best deals in one search.
5. Shop Your Local Brick-and-Mortar
By supporting a local business, you can help your community to thrive financially. You may only get some things on your list at local stores, but it can be a great way to get last-minute gifts or a specific item that would be perfect for a loved one.
While buying gifts for your loved ones, you are also helping to keep those in your community employed. In addition, the money circulating throughout the community is often used to support public schools, parks, and roadways.
6. Avoid Impulse Spending
Stores have great marketing campaigns and strategically design their stores to entice you to buy more than you intended. Before you enter any store (or before shopping online) to spend money, become disciplined with your money and budget beforehand. Also, try to avoid the constant sales notifications you receive via email. When you avoid those sales notifications, you can potentially save hundreds or thousands of dollars.
Impulse purchases can quickly ruin a holiday spending plan and leave you with a mountain of debt to pay off in the new year. Instead, maintain your list of desired gifts, and if you come across an unexpected gift that is too good to pass up, replace it with the one you saw instead of what you had initially planned.
Recommended Read: 4 Ways to Avoid Debt While Holiday Shopping
7. Cash In on Your Rewards Points
One of the most significant advantages of using credit cards is racking up on rewards points. Many credit cards provide valuable rewards on purchases, including those made while shopping. Rewards are usually in the form of points, miles, or cash back. Then you can quickly redeem them for money, travel, gift cards, and other items.
Making seasonal purchases is a great time to use cashback cards. It's like getting a discount on every purchase because you can earn cash back with each purchase.
8. Plan Travel Early
Traveling can be expensive and time-consuming around the holidays, especially if you haven’t planned your expenses like hotel and flights ahead of time. It’s important to know that hotels and flights are cheaper when you purchase a few months before or almost a year in advance. This tip can save you money and guarantee you can book the travel and lodging of your choice.
9. Proceed with Caution About Buy Now, Pay Later Programs
The Buy Now, Pay Later (BNPL) options have become popular. However, before you sign up for BNPL, be cautious about the fees that will accumulate if you don’t pay the item off on time. Automatic payments can help you pay off an item you bought without manually moving money or setting reminders.
10. Be Honest About Your Finances
Be honest about your finances. If you can’t afford to buy Christmas gifts, there are plenty of other ways to spend your time without feeling obligated to buy gifts. By having an honest conversation with your loved ones, they can better understand your financial situation, and you will feel relieved not having to bottle up any negative feelings.
Recommended Read: Avoid Holiday Debt By Using a Sinking Fund
The Money Wrap-Up
Debt can have the power to steal your joy during the holiday season. When you prepare your finances ahead of the holidays, you worry less about money and focus on having a good time with your family. A healthy financial life requires that you budget for special occasions.