The holidays are one of the best times of the year. Spending time with family is special, and for most families, the holidays are the perfect time to bring everyone together.
The flip side to this season can be financial stress, if you don’t plan properly. On average, American households spend $750 a year on holiday items (gifts, décor, cards, etc.). Many use credit cards to pay for holiday spending, and while using credit cards isn’t necessarily a bad thing—if you’re planning to pay the full balance within 30 days—most end up paying over the course of several months at an average rate of 18 percent.
Understanding how much you have to spend and budgeting accordingly makes the holidays less stressful and saves you money. Here are some tips to create and stick to a holiday budget:
- Take time to create a budget that specifies the amount you have to spend and how you plan to spend it. Be realistic and assign a limit for each gift. (e.g., family: $50 each, friends: $25, etc.).
- Budget realistically. Review how much you’ve spent historically. You may find you’ve spent more than you thought. Only budget items you can pay for.
- Use cash, start saving early, and open a “Christmas” account to save throughout the year.
- Start shopping now. Sign up for e-alerts and look for sales throughout the year. Black Friday can be stressful, but it’s a great opportunity to take advantage of fantastic deals. And, remember, you don’t have to start Black Friday at midnight to find great deals in the store. Shop later in the day to avoid the crowds.
- Plan for Cyber Monday. Cyber Monday occurs the Monday after Thanksgiving to persuade people to shop online. Research special offers for specific items you may be looking for. Ads for Cyber Monday start appearing early. Planning in advance is crucial.
- Check your emotions at the door. "Gift-giving deals with emotion, and emotion and spending don't go hand in hand," says Ornella Grosz, the Atlanta-based author of Moneylicious: A Financial Clue for Generation Y . To keep feelings out of shopping, Grosz suggests keeping a list of other financial obligations—credit card debt, car payments, and mortgage payments—on a slip of paper in your wallet. When tempted to overspend, remind yourself of what you owe.
- Stick to your budget. If it isn’t on your list, don’t buy it.
- Most importantly, keep track of spending. Keep a check register and track each check you write, cash withdraw made, and all debit card purchases.
Create and stick to your holiday budget so that you can start your new year off to a great financial start!