The holiday season is filled with joy, but it can also result in overspending that negatively impacts household budgets for months. However, with a little advance planning — and a willingness to follow some smart tips — you can make sure that you don’t miss out on all the festive holiday cheer while still making thoughtful choices that keep your finances on track.
Setting Up Your Holiday Budget
Before you start shopping, spend a little time setting up a holiday budget. Establishing a solid budget and sticking to it is the foundation of smart holiday spending. Setting spending limits for gifts, decorations, and events allows you to enjoy the season without worrying about the impact of overspending and facing overwhelming post-holiday debt.
Determining a Realistic Spending Limit
Before you can begin setting your holiday budget, you must do some critical calculations to determine your spending limit. Smart holiday spending is all about staying within your financial means at all times. In other words, the money you spend on the holidays should not be money that you need to spend to pay your bills. Ideally, you should only use saved money to cover your holiday expenses, although you could also use any surplus funds you have left over each month and even free up extra funds by cutting back on your flexible line items, such as entertainment spending.
Categorizing Your Holiday Expenses
Once you set your total spending limit, the next step is to be more granular about where those dollars will go. Categorizing holiday expenses into sections such as gifts, decorations, entertainment, and food, can help you be more intentional each time you make a purchase. It also allows you to create a more complete picture of potential expenses, and even rank categories so that you know where you feel comfortable cutting back if you go over budget in other areas.
Plan Your Holiday Spending
Even with clear budget numbers in mind, your planning phase is still incomplete. Being mindful about how you plan your holiday spending beyond the numbers alone helps you stay organized and focused, ensuring you cover all your seasonal expenses by avoiding impulse buys and without going overboard.
Benefits of Planning Early
The earlier you start planning your holiday budget, the better. Planning early means you have extra time to save, extra time to think through expense categories, and extra time to look for ways to save when you finally do make a purchase.
Using Cash Instead of Credit
When you set your holiday budget, make sure you consider where you will get the money you plan to spend. You should plan to spend cash, either from your savings or funds from a low-interest holiday loan, rather than relying on high-interest credit cards, payday loans, and other less reliable and high interest sources.
Taking Advantage of Sales and Discounts
Lastly, in addition to the amount of money you can spend, consider how far each dollar can stretch. If you know, for example, that you want to buy a particular item or decoration, start looking for sales and discounts starting in the fall, including on big shopping weekends, such as Veterans’ Day and Black Friday. When it comes to perishable items, watch the sales fliers from different grocery stores in order to take advantage of rolling weekly discounts on popular holiday ingredients such as baking supplies.
Creative Holiday Cost-Cutting Tips
One way to keep your holiday budget on track is to make a deliberate effort to cut costs when and where you can. Be on the lookout for creative ways to save money, including taking a unique approach to acquiring gifts and decorations as well as finding ways to spend less while still making an impression.
Tip #1: DIY Gifts and Decorations
For many cost-conscious holiday gift givers, DIY solutions, especially those that you can repeat and buy supplies for in bulk, provide a great way to cover everyone on your holiday gift list while saving money. Use the internet and websites like Pinterest to find ideas and inspiration for DIY gifts that you can create in large quantities, such as delicious baked goods, hot cocoa jars, Christmas ornaments, and handmade scented soaps. Remember that it isn’t the cost or the size of holiday gifts that matters, but the thought and effort you put into creating and sharing them.
In a similar manner, you can save money when hosting family and friends in your own home by using items you already have or opting for inexpensive bulk supplies to create your own holiday decorations. For example, you could use pinecones and branches from outside or make paper ring garlands and popcorn strings just like you did as a child.
Tip #2: Cost-Sharing Strategies for Events
Another way to cut costs during the holidays while still promoting a festive spirit is to practice cost-sharing for holiday events. According to a Lending Tree survey, Americans spent an average of $556 on supplies and food to host holiday gatherings in 2023. This can present a barrier for many people who enjoy hosting holiday parties but don’t have the budget to pull it off without assistance.
Cost-sharing for holiday events can help offset the costs by spreading the financial burden of holiday parties among family members while retaining the best part — being together during the holidays. Some ideas for cost-sharing include potluck-style meals, BYOB on beverages, gift exchanges with reasonable limits, or even setting up a cost-sharing site for guests to donate to the party rather than bring items or gifts.
Tip #3: Digital Tools to Help Manage Your Holiday Budget
Another great modern way to keep your holiday budget on track is to leverage technology to help manage your expenses. There are several technology-based solutions that are important to keep in mind. For example, advancements in artificial intelligence have made it easier to track deals and prices online. Simply download a browser extension and feed in information, such as what you are looking for and how much you are willing to spend. Apps such as Amazon can also do this work for you. If you place items on a wish list, the app will automatically ping your smartphone when the price drops.
Tip #4: Apps and Resources for Budget Tracking
There are about as many budgeting apps out there as there are names on a holiday gift list, but not all of them are created equally. When it comes to keeping your budget on track during the holiday season, look for apps that you can customize to your holiday needs and spending habits. Some app options with potentially helpful features include the following:
- Fudget: if you want a simple, no-nonsense interface, this is it. This app is great for people who are looking to focus on the basics because it simply tracks income and expenses, which is great for the holidays.
- GoodBudget: This app is ideal because it functions similarly to envelope budgeting. In other words, you put a certain amount of money into each “envelope” (e.g., gifts, food, decor), and the balance counts down as you spend it.
- Spendee: This app offers a lot of personalization, including the ability to set up separate “wallets” for different expenses, such as holiday shopping.
- YNAB (You Need a Budget): This goal-oriented app includes financial planning resources that you can use to focus on short-term goals, such as holiday spending, as well as long-term financial goal setting.
Tip #5: Online Tools for Finding Deals and Discounts
With your budgeting app in hand, you can also work to save money during the holidays by using technology to help reduce the costs of what you do buy. By leveraging different online deal sites and taking advantage of tools that are designed to help you price track certain items and even entire brands, you can be sure that you never miss a sale.
Popular options include browser add-ons such as Capital One Shopping, Honey, and Cently as well as deal aggregation sites like CouponFollow and DealNews. Be sure that you also have a go-to site to check for coupon codes, including free shipping offers. Coupon Cabin is one popular and successful option to check out.
After the Holidays: Evaluate Your Spending
Finally, after the holiday dust settles and the bills hit your mailbox, it’s time to evaluate your spending. Carrying out this step quickly after the holidays is a great way to review and understand your financial habits and prepare even better for next year. It may seem like it’s far too soon, but January is the perfect time to carefully review where you stayed on budget and where you went over your budget in order to focus on the financial lessons you can use to keep next year a little more stress-free financially.
Analyzing What Went Well and What Didn’t
Start your post-holiday spending analysis by looking at your receipts, credit/debit card spending, and bank statements to determine not only how much you actually spent in each budget category, but also when and where each purchase took place. Which categories came in under budget? Which categories came in over budget? Is there a pattern or recognizable difference between the two? For example, did you find that your gift budget exploded in the final few days leading up to the holiday as a result of impulse buys? Conversely, did you do better in the categories where you focused more on online spending and using deal trackers?
Planning for Next Year’s Holiday Season
Each pattern you can determine based on your analysis makes planning for next year’s holiday season that much easier. Not only do you gain a better picture of your triumphs and struggles, you also have an entire year to work through them and develop new, better spending habits. Remember, the key to financial security is making incremental changes to your spending and budget habits that you can maintain, regardless of your income level.
HRCCU Can Help You Keep Your Holiday Spending on Track
Hudson River Community Credit Union (HRCCU) has several ways to support you through the holiday season. We understand that setting a budget — and sticking with it — can be tough. This is one reason we offer our holiday loan program. Stop by your local HRCCU branch today to learn more about holiday loans and how they can help you keep your spending on track. We can even help you design a budget and a repayment plan that helps you achieve your financial goals both before and after the holiday season.
