With Christmas right around the corner, you may be finding yourself already stressed about your gift list. Are you going to have the time to buy everything? And most importantly, can you afford to buy for everyone on your list?
According to a survey done by T. Rowe Price, 64 percent of American parents admit to spending too much over the holidays. Nine percent of them dipped into emergency funds, and seven percent went as far as raiding their 401(k) or IRA accounts to pay off their holiday debts.
What happens in the weeks leading up to Christmas that cause you to spend too much? Why do these months bust your budget? For starters, a barrage of advertisements sometimes entices you to spend more than you want. You may also fall into the trap of comparing how much you spend to others in your inner and outer circles.
Fortunately, there are ways to avoid spending more than you should. Read on to learn more.
Create a Plan to Rein in Holiday Spending
It feels good to give gifts. But, spending money that you don’t have will end up hurting you in the long run. To help you decide how much you can afford to spend, start by creating a budget and then commit to it. In the end, you and your wallet will be happy that you did. This may sound pretty obvious, but with two-thirds of Americans not having a budget at all, you’re not alone if you find yourself trying to curb your spending at this time of the year.
For starters, sit down and actually create a budget that works for you. It doesn’t have to be elaborate, but it needs to include all fixed expenses so that you can determine your disposable income. Keep in mind that saving and investing are also considered fixed expenses. If you notice that you simply don’t have much money left in your budget for holiday gifts, don’t fret. Hold a family meeting and be transparent about your financial state. From there, you can come up with a plan on how to enjoy Christmas without spending money on costly items. The last thing you want to do is put yourself into debt on your credit card or rick racking up overdraft fees with your bank.
In order to prevent overspending and blowing right through your budget, it’s important to hold yourself accountable. The easiest way to do this is to enlist the help of a friend. Pick someone that you trust, someone who is a straight-shooter. Remember: the person you choose will be the one helping you stick to your budget so you don’t go overboard.
If you’re like most people, you’ll probably want to skip this step. Instead, you’ll just divvy out some cash and try to rely on your own discipline. While this may work, finding an accountability partner often works far better than going it alone.
Now It’s Time for Sensible Spending
After determining how much you can afford to spend, it’s now time to get down to the nitty-gritty: what you’ll buy, who you’ll buy for, and how much you’ll spend in total.
For starters, come up with your total spending limit based on roughly 80% of what’s in your budget. So, if you can afford $500, spend $400 instead. This will allow you a little leeway in case something comes up during the month.
Here’s where a lot of us get into trouble. Say you decide to spend $50 per recipient because that’s the amount that you factored into your budget. But, when you set out to shop, you may fall prey to the “perfect gift” scenario. For example, if you see a potential gift that costs $54.99, you may think the extra $5 is no big deal. However, now you may feel obligated to up your limit from $50 to $55 on everyone else’s gift as well. Before you know it, you’re over budget.
To reduce costs, you can simply stick to your original budget, or perhaps spend even less per person and invite your friends over for a holiday potluck dinner and game night. Chances are everyone will have a blast – without spending a lot of money.
Enjoy the Season
Now that you have a plan in place to spend sensibly, it’s time to focus on what’s really important: spending time with people you care about, exchanging thoughtful gifts and experiences, and celebrating good times. ‘Tis the season to create lasting memories without busting your holiday budget.