If you’re like many U.S. consumers, you’re aiming for a bigger winter holiday budget this year.
TransUnion, one of the three major consumer credit bureaus, conducted a holiday shopping season study and found that 51% of the respondents anticipate spending at least $500 on related expenses. Just 36% of respondents had planned to spend as much in 2022.
Indulging is wonderful when you can afford it. But make sure you’re in a healthy financial place before you start spending. Here’s how:
Make a Flexible Spending List
List the things you will likely be buying for the holidays. It doesn’t have to be exact. You’ll refine it as you go along. For example:
— Extra travel: This may include more gas, a car rental, airfare and hotel accommodations. Estimate the costs.
— Holiday decorations: It may be items like flowers, candles, wrapping paper and a Christmas tree. Jot down a number for it all.
— Additional groceries: If you’ll be baking you may need special ingredients, or you may be cooking for a crowd. Whatever the case, consider the costs.
— Entertainment: Going to a show? Will you be meeting with friends who are in town for cocktails and dinners? Throw in a number for how much you might be spending.
— Presents and donations: Think about how much you would like to give as gifts and to charity this year.
[READ: How Much Should I Spend on Groceries?]
Tally everything and you’ll arrive at an estimate figure. If it’s too high, adjust downward until you reach a more comfortable one.
Shinobu Hindert, certified financial planner and the founder of Empowered Planning in San Diego, says it’s important to be comprehensive.
“We tend to forget about things like the decor, holiday parties and new clothes,” Hindert says.
“Have an idea of what your extra spending will look like ahead of time. This is an overview and your opportunity to set up guardrails. You can reallocate as you go along,” she adds.
Create a Sound Giving Plan
The pressure may be on to give presents to more people than you want. But this is your money and you get to decide how to spend it.
Develop a list of each person to whom you want to give to and the amount you are willing to spend. If you’ve already decided that $300 is your maximum for gifts and there are five people on your list, an even distribution would be $60. Or, if you have two children, you may want to spend $100 each on them, $50 on your spouse and $25 each for two of your siblings. It may not be exact, but it’s best to have a figure in mind.
Check in with family members to get a sense of what they are planning to do, says Dustin Smith, a certified financial planner and senior vice president at Wealth Enhancement Group in Plymouth, Minnesota.
“For example, as adults it may be more enjoyable and cost effective to go out for dinner and skip the gifts,” Smith says.
“Or, decide on just gifting to children and not your siblings. The holidays can be stressful especially if you or other family members are having money issues, so it is best to have open, honest conversations now.”
[Related:What Stores are Open (and Closed) on Black Friday?]
Review Available Cash
You’ll need to know where the money for the holidays will come from, so see how much you have in your bank account today.
If you have $800 in savings and you have accepted that $500 of it will go toward the holidays, you’re in good shape. If you use your credit card, immediately transfer that cash to the account so you don’t have to wait for the bill.
Just be careful to only use money that’s not earmarked for a more important goal.
“You don’t want to pull funds away from what you’ve saved for something like a down payment on a home,” Hindert says. “This is post-tax money, so examine how long it took you to save it. Don’t take it out for impulse purchases, and that includes the holidays.”
[Related:Shopping Rules to Slash Impulse Spending]
Trim Spending Now for More Spending Soon
If you want to spend more than the cash you have on hand, analyze your cash flow. If there are indulgences you can reduce or eliminate, at least temporarily, do so, says Joseph Russo, CEOof Advantage Investment Advisor in Naples, Florida.
“Write down all of what you spend on a normal basis,” Russo says.
“Now you can make some decisions. What’s a priority for you? Do you really need all these streaming channels? Anything else you can get rid of? Having enough for the holidays is often a question of organizing the data. You have to be willing to do it, though,” he adds.
Make cutting back specific. If you want to spend $750 for the holidays but are short by $200, aim to reduce spending by that amount. If that means dyeing your own hair or forgoing a couple of golf games this month, so be it. It’s a short-term sacrifice.
Bring In More Money
If you can’t cut your budget down and don’t have much in savings, you still have options.
You may be able to work a little more. Many retailers are seeking part-time employees for the holidays. Identify a store where you like to shop and ask if they need help, Hindert says. Not only will you be able to set the earned cash aside for your holiday spending goal, you may get a discount at that retailer so those earnings stretch further.
Or maybe you can take on gig work like delivery driving, or a side hustle such as childcare or pet sitting. The point is to consider all opportunities that are convenient and that make sense for you.
Another great way to add funds to your holiday spending goal is by selling unnecessary items that you own. For example, you may have old electronics sitting in a drawer, or nice clothes you haven’t worn in a long time but that have retained their value. Maybe you have collectibles that were passed down to you but you have no interest in or sports equipment the kids have outgrown. Use the proceeds for your holiday spending goal.
Use Credit Cards and Rewards Right
Using a rewards credit card for holiday purchases is often wise, since you earn as your charge. Just pay the entire balance in full with the money you’ve set aside for the spending so you aren’t charged interest on carried over balances.
Also, decide which cards you want to use for different purchases. You may have one that gives more rewards on certain items or stores. If so, make a note on your holiday spending list.
You may already have cash or cash equivalents sitting in your credit card account, just waiting to be used. Log into your account or use the app to see if you have any earned rewards available.
If you have a cash back card, you may have money available for purchases, as statement credits or to trade in for gift cards. If you have a card that gives the currency as points, you may be able to redeem them for cash, purchase items from the company’s shopping portal or redeem for gift cards.
Make a Shopping Day Calendar
Instead of shopping haphazardly, plan ahead. There are a number of days on the horizon that can save you money when you shop:
— Black Friday: November 24. This is the traditional day that marks the start of holiday sales. Look for loss leaders, which are products priced well below their market cost. They’re designed to get you in the door and spend more on other things that are profitable, so be careful.
— Small Business Saturday: November 25. Small businesses around the country provide shoppers with deals on this day.
— Cyber Monday: November 27. This is when many online retailers offer special discounts and very often free shipping.
— Super Saturday: December 23. This is a little risky because not everything you want may still be on the shelves, but the Saturday before Christmas is usually the time to get deeply discounted items.
Finally, Track and Adjust
Monitor all of your spending as you go along. You can use a good money management app — or use your debit or credit card– and review your daily transactions.
Set alerts on your banking accounts, too. Many financial institutions and fintech companies that partner with banks, such as Chime, let you set up notifications as a warning system.
“If you’re avoiding looking at your spending daily, sound the alarm,” says Jennifer Dohm, head of consumer communications at Chime. The built-in alerts will automatically let you know how much is left in your account.
If you’re nearing your personal limit too fast, slow down and analyze. You have choices: Either stop when you hit your personal limit or increase the amount you want to spend and re-organize your plan so you can keep going without taking on debt.
“The worst move you can make is avoidance,” Dohm says. “While making a budget feels like you deserve a gold medal — and you do — keeping it is truly the part that counts.”
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Prepare Your Finances for the Holidays originally appeared on usnews.com
Update 11/20/23: This story was published at an earlier date and has been updated with new information.
