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Don’t Let the Holidays Bust Your Budget

Jar of money with Christmas bow
Photograph by Getty Images
Jar of money with Christmas bow

Let’s get something out in the open. Sure, the holidays are fun and festive, and they’re a great opportunity to slow down for a bit. And we get to see friends and family we may not have had much chance to see throughout the hectic year.

But let's all just admit it: They’re also kind of stressful. You’ve got your regular family and friends to buy gifts for, and then your great-aunt Ida is coming in from Idaho for the holidays so you have to get a little something for her, and Junior’s been asking for an Xbox all year long … how will you ever afford it all?

It’s all in the planning. “It’s like the old saying goes: If you fail to plan, you plan to fail,” says Joe Wilson, wealth management adviser at TIAA-CREF. Here, Wilson and Andrew Schrage, co-owner of financial website Money Crashers, offer tips that will help you get out of the season alive—and with your savings still intact.

Step 1: Figure out Your “Wiggle Room”

The hardest part of planning for the holidays is getting started. If you didn’t factor room into your budget for holiday spending back at the beginning of the year, you might be wondering where you’ll come up with the cash. Instead of putting everything on a credit card and wondering how you’ll pay for it later (always a bad idea), sit down and make a list of everyone you want to buy for this season. Include tips for people like your mailman and the dry cleaner, and gifts for your kid’s teachers.

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Then, take a look at your budget. Whether you keep track of your spending on a simple Excel spreadsheet or a more sophisticated online system like LearnVest or Mint, you’ll need to figure out where you have wiggle room before you can determine how much money you can spend on gifts for the season.

If you don’t currently track your spending, just take a look back at your most recent credit or debit card statement. Add up how much you’ve been spending on discretionary items like coffees, eating lunch out, going to the movies with the whole family or buying things for the house. Add up approximately how much you spend each month on these items, and determine how much you think you can reasonably cut back during the holiday season. This will help you determine your budget wiggle room for the season, and give you an idea of how much you can afford for a gift budget.

Step 2: Factor in Travel

Don’t forget to include travel spending in your holiday budget (unless you have a separate travel spending account budget, in which case you can skip this step). “If you plan on traveling over the holidays, enter your dates now on a fare aggregator site like Booking Buddy to find the deals early,” says Schrage. “Also, consider starting your trip on a Tuesday or Wednesday, when prices are better, and try combining the kids’ luggage to save on baggage fees.”

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Step 3: Prioritize Your Spending

“One of the things I share with my clients is that wants are unlimited, but resources are not,” said Wilson. That’s why it’s so important to prioritize your spending budget when it comes to the holidays. Once you know how much you expect to spend on holiday travel, you can deduct that amount from your wiggle room and you can start setting a gift budget.

So, with a budget and a “to buy for” list in hand, start setting spending limits for each person on the list. Start with the people you already have ideas for. If you know what you want to get for Uncle Charlie, do some online research to figure out how much you will be spending on him, and deduct that amount from your wiggle room. Continue down the list this way until each person has a set amount of money assigned to him or her.

Step 4: Include Your Kids in the Conversation … and the Shopping

Don’t forget that one of the most important things we can do to help shape our children’s financial future is to start having financial conversations with them today—and that includes holiday budgeting. “Bringing your kids into the holiday money conversation is a great excuse to talk to them about money and reiterate the idea that money doesn’t grow on trees, someone is working for this money, and those gifts they get for the holidays are coming from a person who worked hard to be able to provide them,” says Wilson.

As such, it’s a good idea to have your kid sit down with you when you’re creating your holiday budget list (you can always figure out the wiggle room number minus what you plan to spend on your kids, if you’d rather they not know how much you’re spending on them). It might seem stressful, but consider bringing them along when you shop, too. “To have them witness you wrestling with the notion of ‘could I be spending this money more wisely?’ … it’s a powerful thing,” said Wilson.

Step 5: Spend Smartly

It might be tempting to purchase everything you need on Black Friday or Cyber Monday, when the deals are so abundant, but take caution. “Do your research in the weeks leading up to Black Friday and Cyber Monday, because the deals will be everywhere,” says Schrage. “Track what you really need to get, who has it on sale and what time those retailers open.” The best way to make the most out of Black Friday deals is to know exactly what you’re looking for before you go in, purchase it and get out. Otherwise all the other deals might tempt you to spend more than you have allotted in your budget.

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Step 6: Consider DIY

If you’re still worried about keeping on track with your wiggle room budget, DIY gifts make a great personal, budget-friendly alternative to store-bought items. When it comes to the holidays, it’s the thought that counts, not the amount you’re spending. If you think you might want to go the DIY route with a couple people on your list, consider reaching out to the to suggest that you both go that route. That way you won’t be left feeling guilty when you hand over a beautiful, handmade ceramic vase to your cousin Lea while she gives you a cashmere sweater.

Step 7: Start Planning for Next Year Now

A little planning ahead can really go a long way when it comes to budgeting. If you start thinking of what you’ll need for the end of the year while you’re putting your budget together at the beginning of the year, you might be able to avoid some stress come holiday time. “The best way to financially prepare for the holidays is to start really early—as in the beginning of each year,” says Schrage. “I keep a separate bank account, and $25 out of each paycheck is redirected there for holiday spending—that way I start off the season with roughly $650.”

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