The holiday countdown is on, which means the pressure is on to get your holiday shopping done. Shopping means spending and most people go into the holidays without a spending plan. You think you’re being smart by looking for sales and bargains, but you spend far more than you should. However, the holidays don’t have to derail you financially. Check out these smart holiday spending strategies.
When should I start?
The holiday planning process should really start in January. That way you can set money aside monthly and stick to that budget. Now you’re thinking – it’s November, what am I going to do?! It’s not too late to start a savings plan. The same principles apply no matter when you decide to start.
How much do I spend during the holidays?
Most people have no idea. But budgeting for gifts, parties and other expenses is critical. It takes planning and foresight so that you don’t go into Black Friday and spend a ton of money thinking oh, at least I’m getting discounts. Again, that isn’t necessarily helpful.
How much do I make and how much can I save?
There are free websites and excel spreadsheets where you can enter that data to get a better idea of what you have to work with. If you figure you spend around $2,500, you know that starting in January, you need to be able to set aside about $208 a month. If you’re not looking at these figures until November, you may find that you can afford it or you may realize oh man, this is going to crush me for the rest of the year.
Can I afford it?
If you find that you can’t afford it, don’t buy it. Buy something smaller or more reasonable or make a gift. No matter how tempting or easy it seems, don’t finance Christmas presents. Live within your budget; nothing will destroy it worse than having a huge credit card balance.
Start planning for next year
Now that you’ve looked at your saving and spending list and checked it twice to make sure you’re on track for the next few weeks, you can start thinking about saving for next year.
After you set up your smart holiday spending strategies in January, the next step is to check in at the quarter, half way through the year and in the last quarter so you know how you’re looking going in to the holidays. It only takes about an hour to set up your budget and you can factor about 30 minutes every quarter for review. That’s only two and a half hours – the same amount of time it would take to watch a couple of episodes of your favorite TV show.
Plan for success
Why is it important to start thinking about this now and planning for next year? If you plan and stick to your budget, you can plan for success – no matter what you’re saving for. Most people think they need to earn big to save big and that’s simply not true.
Michael Carlin, AIF®