Tips for Managing Your Finances During the Holidays
The holiday season means different things to different people. For many, it is a joyful time of celebration and an opportunity to catch up with loved ones. For others, it can become a stressful time marred by shopping lists and seasonal expenses. No matter where you fall on this spectrum, you’d probably agree that it’s easy to get carried away and overspend during the holidays.
From Thanksgiving dinner to putting presents under the tree, holiday spending can add up quickly. In 2019, U.S. households spent, on average, about $1,500 for Christmas alone. If you are trying to stick to a budget this year, we can have some tips that can help. First, let’s look at what it is about the holidays that causes so many people to exceed their budget.
Why Do We Overspend During the Holidays?
While the holidays are supposed to be festive, over 60% of Americans worry about the financial strain the season may cause. Here are some of the more common reasons why Americans go overboard this time of year.
Stress and Emotions
It’s no secret that the holidays can elevate stress levels and even lead to depression for some people. The additional stress may manifest itself in the form of frivolous spending, which can wreak havoc on our finances if we are unsure how to address the emotional strain we are feeling.
Pro-Tip: Beware the urge to engage in “retail therapy.” While shopping can seem like a good way to blow off steam, it is important to stay focused on your long-term financial goals instead of indulging in unplanned shopping excursions that can throw your budget off track.
Family and Social Pressures
Advertisements promoting material things are more common this time of year than at any other. Added pressure from our social circles to not only keep up with friends, but also to choose the perfect gifts can increase our desire to spend more.
Poor Planning and Procrastination
One of the primary causes of overspending is waiting too long to prepare for the holidays. And let’s be honest, we’ve all been there. It’s important to be mindful about setting aside some money throughout the year to build up a holiday budget. Otherwise, it can be easy to fall into the trap of throwing our budget out the window as the holidays approach.
7 Ways to Stay on Track During the Holiday Season
When it comes to managing your finances during the holidays, it may feel like the cards are stacked against you. However, with a little planning and self-restraint, staying on track is easier than you may realize. Here are seven tips for getting through the holiday season without abandoning your budget.
1. Build the Holidays into Your Regular Budget
One of the most common reasons the holidays can take a toll on our budget is that we try to take on too much at once. Since we generally know what to expect each year, it’s a good idea to think about what we might need and spread it out across the entire year. For example, if you normally spend about $1,200 per year on gifts for friends and family, then consider setting aside $100 per month to cover the cost. That way you aren’t left scrambling to come up with the full amount in just a few weeks.
2. Get Familiar with Your Holiday Expenses
Another reason it can be easy to overspend is that we don’t always realize we are doing it. We cannot stress enough how valuable the practice of writing out your expenses can be – and holiday expenses are no exception! Keep in mind, there’s more to it than just the gifts you buy for loved ones. Think about anything that may fall outside your normal spending habits:
- Home décor
- Charitable giving
- Seasonal activities
- Postage and shipping
3. Prioritize Your Holiday Expenses
As your list of holiday expenses grows, it’s not uncommon to have sticker shock. That’s ok! That’s precisely why it’s so important to work on your budget. Now that you have a better idea of what you’re actually spending, it’s time to set priorities. After some consideration, you should be able to clearly identify what expenses you are willing (and able) to tackle and which items may need to wait for next year. Some helpful questions you can ask when prioritizing your holiday spending include:
- Do I really need this?
- How will I pay for it if I do buy it?
- Can this wait until next year?
4. Set Spending Limits for Yourself
Once you’ve decided what you are willing to take on and what you’re willing to put off, the next step is to set spending limits for yourself. Look over your budget holistically, and think about what you’re willing to spend and where you’re willing to spend it. Settle on a total number, and allocate it across the expenses you plan to keep for the holiday season, starting with your top priority item(s). Determine what you can spend on each item, and stay diligent about not going over budget. Remember, the key to improving your financial situation is sticking to a budget that will keep you on track to reach your goals. Remember that spending more now means you have less later.
5. Decide How to Pay for the Holidays
Even if you don’t have a dedicated holiday budget today, you can create one tomorrow. We strongly recommend making your plan early in the year and building your holiday budget little by little, month by month. However, there may be times when you just aren't able to build savings. When this happens, it can be tempting to turn to credit.
Credit cards may seem like the easy option to make up for a seasonal shortfall, but they can also create a long-term problem if not used responsibly. If you are planning to use credit this holiday season, you should still set a budget for yourself. And you absolutely must consider what you can afford to pay each month after the holidays to eliminate your debt as quickly as possible.
Pro-Tip: If you struggle with paying off credit card debt, consider using a low rate personal loan to consolidate credit card payments and get out of debt faster.
6. Look for Ways to Save
This practice may sound like a no-brainer, but it is often overlooked. Some of the most effective ways to reduce holiday expenses include the following:
- Create a list and shop early to avoid impulse buying
- Compare prices and look for price matching opportunities
- Take advantage of “last year’s model” when possible
- Look for ways to earn discounts or other rewards with your mobile wallet or checking account
- Cut back on personal indulgences and luxuries
7. Track Your Spending and Adjust as You Go
No matter how solid your budget is, it won’t do you any good if you aren’t following it. Stay on track by keeping a log of your spending and make sure to adjust when needed. You can use digital banking tools to monitor your spending habits to ensure that you are setting yourself up for success.
Let Us Help You Prepare for the Holidays
At First Service, our mission is to provide you with financial products and services that enhance your life. That means offering options designed to help you reach your goals. That’s why we are proud to offer several different types of savings accounts to help you build the financial future you want. Let us help you manage your finances and find out for yourself what it means to be “For You, Not Profit.”