5 Simple Steps to Prepare Your Holiday Budget

Budgeting, Investing & Retiring

Whether you want to admit or not, the holidays are fast approaching and planning ahead is key to managing your money, so that you don’t overextend yourself or go into debt. Last year, the average American spent $882.45 on Christmas gifts, food, decorations, travel, and other miscellaneous holiday-related expenses, according to the 2019 Christmas Spending Statistics from personal finance analysts The Ascent. Meanwhile, this same study found that 21.5 percent of respondents went into debt to pay for these expenses.

With so many consumers still experiencing financial hardship as a result of the coronavirus pandemic, it’s more important than ever to map out a budget and find affordable ways to make this season special. Here are five simple money moves you can make now to avoid taking on debt later this holiday season.

1. Set Your Holiday Budget

Spend time looking over your holiday expenses from last year to figure out the average amount you spend on seasonal purchases. This is also a good time to speak with loved ones about gift expectations and consider scaling back to just giving gifts to the kids or setting up a Secret Santa exchange, so everyone is only responsible for one present rather than several.

Once you know whom you plan to shop for, jot down a few gift ideas for each individual, along with a budget per person. This will quickly tell you whether you need to find more affordable ideas. If you need help writing out a budget, use this free budget worksheet to get started.

2. Reduce Recurring Expenses

Over half of Americans are currently living paycheck to paycheck and finding extra wiggle room in your monthly budget to afford holiday purchases and gifts may seem impossible. However, spending a few moments looking over your recurring expenses will help you pinpoint one or two subscription services or regular purchases that you can either trim back on or completely eliminate to give you some extra leeway for holiday costs. For instance, you can save by freezing your gym membership, pausing a monthly delivery box or cutting back on Friday night movie rentals and takeout for now. Remember, you can always add these expenses back after the holidays.

3. Rack Up Rewards

From cash back credit cards to loyalty points and rebate apps, there are many ways to earn rewards when you shop. You just have to shop strategically and know how to accumulate rewards faster. For instance, sign up for loyalty programs wherever you shop so that you never miss any points or freebies.Use a rebate site like Swagbucks or Rakuten to earn rewards online faster.

When it comes to making your payment, review current cash back offers available through your credit card, as you may be privy to bonus rewards when shopping at a specific store. This is also a good time to apply for a new credit card that offers a signup cash bonus when you spend a certain amount within the first few months. Quickly compare credit card reward programs and sign up bonus offers at CreditCards.org, which organizes card details in one place so it’s easier to figure out which one will work best for you. Then, use your free cash back to cover holiday purchases.

4. Think Beyond Gifts

Most people budget for gift shopping, but overlook the impact of all those smaller seasonal expenses that add up fast and cause you to overspend, from family photos to postage for greeting cards to pet sitting services when you’re visiting loved ones. Thinking about all these items can help you figure out more affordable alternatives, so you can spend your money in more meaningful ways. For instance, this year ask a friend to snap a few pictures of your family in your backyard, which you can then send to loved ones via email with a more personalized message.

When it comes to caring for your furbaby, skip the pricey kennel and look for affordable pet care or dog walkers in your area through Rover.com. Putting a little extra thought into planning can really help you save.

5. Cook in Bulk

When the holidays roll around, life goes into overdrive and it seems like there’s never enough time to get everything done. One of the items that most consumers begin dreading is preparing nightly meals for their family. If you’re expecting out of town guests, it is often easier to order takeout rather than cook for a big group. However, you can avoid the increased costs that come with ordering takeout food by preparing meals in bulk. Every time to you cook a dish for your family, double the recipe and freeze the leftovers. Separate these leftovers into single-size servings that you can reheat in a zap. This way, you always have a meal ready to go and don’t have to spend more on food prepared away from home.

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Photo ©iStockphoto.com/eva-katalin

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