The Christmas season is supposed to be about joy, family, and a time to reflect on our blessings. So why do the holidays cause so many of us to feel frazzled and stressed, especially when it comes to finances?
What with gifts, lavish holiday meals, decorations, and travel expenses, it’s easy to see how holiday spending can get out of hand before we even realize it. Fortunately, a simple holiday budget may be all you need to keep your spending in check without sacrificing the things you love most at Christmastime.
Do You Really Need a Holiday Budget?
If you’ve ever been shocked at the state of your bank account at the end of December or have found yourself worrying about how much you’ve spent leading up to Christmas morning, you’ll benefit from a holiday budget. A holiday budget – rather than being restrictive – can help you truly enjoy the holiday season and focus on the things that matter most to you and your family.
My advice is not to wait until the New Year to start making financial changes! Being mindful of your spending this holiday season will make any financial New Year’s resolutions you make that much more likely to stick come January.
How to Create a Holiday Budget
Creating a holiday budget is similar to creating a household budget but on a much smaller scale. If you already have a household budget, creating your holiday budget will be that much easier. Start by determining how much you have to spend (or want to spend) this holiday season. Keep your number realistic, but challenge yourself to stay within the limit you choose.
Ideally, your spending limit this season will be financed completely by savings and income you already have and will not add to any credit card debt. Make sure the limit includes all holiday expenses, including money for gifts, travel, decorations, food, charitable giving, and any other expenses you can think of that you wouldn’t purchase in any other month.
1. Create a Gift List
Oftentimes the biggest hit to the bank account is the gift list. Many of us get so caught up in the joy of giving on Christmas that we forget to prioritize our financial health. One of the biggest mistakes you can make is to start shopping without a gift list in mind.
Start by listing out each person you plan to buy gifts for and how much you plan to spend on that person’s gifts. This way, even if you don’t know exactly what you want to get them when you head to the mall, you know the price range you need to stick within to adhere to your budget.
Don’t forget to include stocking stuffers on your gift list! Even one or two stockings can add up faster than you realize. Additionally, purchasing some generic gifts for acquaintances or neighbors who thoughtfully bring you an unexpected gift can save you some embarrassment.
2. Create a Holiday Meal Plan
Next, budget a holiday meal plan for any meals or dishes you’ll be responsible for providing. Don’t forget to include the price of drinks! (Drinks can be the most expensive part.) And if you like to bake during the holidays, add the cost of those ingredients to your meal budget as well.
3. Create a Decoration List
It seems like every year one or two strands of Christmas lights go out, so we’re always stopping by the grocery store for some extra lights we hadn’t anticipated. Make sure to budget for extra decorations you may need to get you through this season. Additionally, don’t forget to include trimmings you’ll need like wrapping paper, bows, gift tags, and gift bags.
4. Budget for Travel or Holiday Activities
If you’re traveling to visit friends or family for the holidays, those expenses should definitely be a part of your holiday budget. Even if you’re not traveling, you may be taking your family to a holiday production like The Nutcracker or on a snowy sleigh ride if you’re lucky enough to live somewhere it snows during Christmas.
If the budget is tight, this can be a great section to cut back on expenses. Instead of spending on an expensive ride on The Polar Express, you can bundle up your family with some hot chocolate and popcorn to drive around different neighborhoods and look at Christmas lights. Likewise, going to Christmas church service or curling up on the couch with a Christmas movie at home doesn’t cost a dime!
5. Add in Extras (Christmas Cards, Holiday Clothing, etc.)
There will always be extra costs you hadn’t anticipated, so go ahead and add an “extras” category to your holiday budget. You might include some known extras that don’t fit neatly anywhere else (such as Christmas cards), but also keep some extra cash in there for truly unplanned expenses such as an ugly sweater for a last-minute holiday office party.
6. Plan for Charitable Giving
Charitable giving is an important part of many people’s holiday traditions, and it’s a wonderful time to give back to your community. Just like with the other items in this list, charitable giving should be included in your holiday budget.
Set Priorities and Track Your Spending
If your itemized budget list exceeds the spending limit you set, it may be time to set some priorities for the things that are most important to you. Additionally, you can find creative ways to cut back on some categories.
For instance, opting for fewer (but no less meaningful) gifts per person on your list is one way to cut back on expenses. Alternatively, planning a less extravagant meal or inviting contributions to a friends-and-family potluck could be another way to lessen the burden on your budget.
The most important thing is to track your spending throughout the month so you can adjust the holiday budget when necessary. It’s not likely that you’ll spend exactly according to your budget, but tracking your holiday spending on a daily or weekly basis will allow you the foresight to curb on some categories when you’ve overspent on others.
Learn More at Caviness Wealth Management
At Caviness Wealth Management, we help clients in all walks of life plan and prepare for their financial future. Many times, a secure financial future starts with good habits like budgeting and being mindful of your spending. For more great tips, follow our blog or click here to schedule a conversation today to see how we can help you take control of your financial future.
Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual.
