Budget the Right Way So Nobody Ends Up with a Fruitcake
It’s that time of year again – the season for decorating your home, attending holiday parties and enjoying all the fun events that are happening. Unfortunately, it’s also when gift-giving can create huge stress if you’re not prepared for the spending that goes with it.
According to the National Retail Federation, this year alone the average American plans to spend nearly $660 on gifts for family, friends and coworkers. That’s why monitoring your spending and sticking to a budget should be an important consideration for the holidays.
Figure your finances in advance
The best way to prepare for holiday giving or trips to visit family and friends is to create a budget so that you know what you can afford to spend. To start the process, subtract your monthly expenses from the net income you earn for the same period. It may be also useful to differentiate between fixed expenses such as your mortgage or rent, utilities and car payments and discretionary ones such as food, entertainment and vacations that you can adjust. (If you need help getting started, our budget calculator can help).
It will help, too, to review last year’s spending on gifts and travel. Knowing upfront what you can realistically spend will go a long way toward keeping you from the dreaded New Year’s bill-paying hangover.
Plan ahead for holiday spending
Here’s another tip: to put yourself in a better position for next season, consider opening a savings account dedicated to holiday spending. (Just FYI: First Internet Bank offers free and interest-earning savings accounts that are hard to beat!) It’s an excellent way to avoid feeling like your friends and family just put you on the “naughty” list. Choose a savings goal, then divide that by the number of weeks (or pay periods) before the holidays to calculate how much to set aside each paycheck.
Once you’ve determined a target budget, you can decide how you want to fund it. If you already have direct deposit set up with your employer, it may be possible to divert a specified amount from each paycheck — $5, $10, $50 or whatever you decide to contribute — to this account.
Automatic deposits make it easier to meet your savings target; best of all, because the money lands in a separate account, you’re less likely to spend it. While you’re at it, you might consider adding a few extra dollars above what you’ve planned for gifts and travel and use it to cover holiday-related costs for decorations or dining out with the family or friends.
Get the most for your money
The earlier you know what you’re buying for each person on your list, the sooner you can start tracking prices and timing your purchases to take advantage of seasonal promotions and sales. After all, you can shop for gifts at any time during the year! The traditional holiday sales weekends like Labor Day, Black Friday and Cyber Monday are great times to find bargains. If you do shop early, you’ll want to keep a list of what you have gotten for whom and what you still need to buy….that way you won’t end up buying three gifts for Aunt Mabel and none for Cousin Ralph.
During the holiday season, you’ll often get invitations to last-minute events or asked to participate in a gift exchange at work. And those extra purchases – no matter how small – can be budget-busters.
Be prepared for surprises by purchasing one or two reasonably-priced generic items that you can give in return when you receive an unexpected gift or when you have an unanticipated seasonal party to attend. Gift cards are a simple solution, but you may want to choose different types of presents to be sure the gift will be appropriate for the recipient.
Have a budgeting “Plan B”
As the holidays approach, you may find that you need to make adjustments to reach your savings goals. For example, you might have to exercise some restraint on impulse spending (like maybe just one eggnog latte a week), to increase the likelihood you’ll reach your savings goal and avoid the post-holiday financial blues. If you see that your budget is going to fall short of covering expenditures, consider paring down your list or find alternatives to the gifts you’d planned to purchase.
Budgeting for the gift-giving season can make a huge difference. Exercise a bit of pre-planning and you could be looking at a happier – and holiday debt-free – January. To look at some great savings options, or any other of our great banking services, check out all we offer at firstib.com.