How To Create A Realistic Holiday Budget And Stick To It
The fairy lights are already up and holiday tunes are filling the air. It is the season of fun and celebrations. And, also of a lot of spending. According to retail surveys, people around the world are expected to spend upward of $400 per person during the holidays this year.
With so many discount offers and sales notifications, it can become all too easy to slip into a downward spiral of overspending. There’s no point in being reckless about your finances and then blaming your post-Christmas financial hangover on the holiday spirit. You can enjoy the holidays, spending as much as you want, if you have a plan
The key in the previous sentence is “as much as you want”. We’re not going to tell you not to spend your money on gifts or travel or whatever it is you want. But you need to decide how much you want to spend during the holidays and prepare yourself and your finances to be able to do so without being broke by the end of the year.
Get A Holiday Budget Now!
A holiday budget is what you need. A holiday budget will help you devise a spending plan that works for you and one against which you can track your spending. And, for all you procrastinators, who tell themselves that they’d start budgeting closer to Christmas, trust us,
the earlier you start, the more in control over your finances will you be. It gives you the time to make adjustments in spending, track prices of gifts and make better decisions.
It will also help take out stress from your life and ensure that you don’t go into debt to have a good time this season.
So here’s how to get started on your holiday budget:
Know How Much You’ll Make This Season
Now, if you have been using Wallet for a while now, you would’ve already started saving for Christmas using our Goals feature.
But, all the others who are yet to get started on their financial fitness journey, you don’t need to worry. The first step is to find out how much money you’ll be making before and during the holiday season.
If your pay is regular, then this wouldn’t be a problem. If your pay is irregular, I would suggest that you go through your previous three month’s income and take an average of it.
After you’ve calculated how much you’ll be earning, the next step is to take a look at your monthly expenses.
Know How Much You Need To Spend
Before even thinking about holiday spending, you need to account for how much you usually spend in a month. So make a list of your fixed and unavoidable expenses–rent, groceries, loan payments and so on.
Again, this becomes much easier if you have been tracking your expenses for a while or have imported your transaction data to Wallet. Now you’ve an idea about how much you have left with you to realistically spend during the holidays.
The difference between your total projected income and your basic budgeted expenses is what you’ve left to spend.
Now, Calculate Your Expected Holiday Spending
Make a list of all what you intend to spend on. Be as specific as possible. Possible spending categories are:
Gifts and related items, travel, holiday special meals, baking equipment, Christmas tree and other decor items, holiday clothing…
This list can be as short or as long as your family wishes it to be. But what you’ve to remember is that this list needs to be flexible and you should be ready to swap things and move them around depending on your finances and priorities.
Create A Budget (Or As Many As You Want To)
Now, we have two important figures. One, the difference between our projected income and expenses (Let’s say, A) and the second our expected holiday expenses (Let’s call this, B). There are three possibilities.
You may find that A > B, which means you’re in a safe space. You can easily spend B for your holidays and even put aside a bit to your favourite savings goal.
Or, A=B. Wow! That’s awesome still. You’ve enough money to fulfil all what you want to! Enjoy your holidays.
The last case is when A< B. Don’t worry. This is why we asked you to plan earlier. Now you’ve enough time to do something quick to earn more money. Here’s a list of things you can try doing to bring A=B.
And, if that seems impossible, because you’ve no time left in the week, after your work and responsibilities, you need to go back to your list and revise it.
Finally, once you reach any of the above favourable situations, create a budget.
Now this is totally your choice. You can create one big budget for the holidays and track everything you spend against that. Some of us have one holiday budget and a different budget for gifts, another for travel and so on.
The key is to simplify and choose a way you know is easy for you to follow through. If you overcomplicate your finances, chances are that you’ll give up on them.
Track Your Spending Against Your Budget(s)
Thanks to two of Wallet’s most powerful features, Budgets and Labels, creating and sticking to your holiday budget will really be a cakewalk for you.
Labels allow you to customise as much as you want to, which means you have 100% control and freedom on how to manage your money.
So, say you set up a holiday budget. Now whenever you spend something on anything holiday-related, you can label it so and it will automatically be counted in your holiday budget, At any given point, you can know how well or badly you’re doing on your budget.
For those who love much more detail, you could create multiple budgets and labels. For instance, two things I tend to overspend on are gifts and food. So I have a holiday budget in which I count everything in and then I have separate gifts and holiday food budgets. I also use three labels: Holiday 2018, Gifts 2018 and Holiday Food 2018 to make sure that I don’t overspend on any of this.
Save Money On Holiday Shopping
The final way to really make sure you don’t go overboard is by saving money when you’re out to shop. There can be many ways to make sure this happens.
Make a shopping list: Every time you step out to shop, make a list and, more importantly, stick to it. You can use shopping lists on Wallet not just to create a list of things to buy. You can list down whom all to get gifts for, as well, striking off their names one by one once you shop for them.
Research prices: More than half the population of most countries are planning to shop for the holidays online this year, say studies. So, even if you aren’t going to be buying online, it helps to keep track of prices and discount sales so as to not miss out on them. Time your purchases right.
Stay away from credit cards: Even if you know you can pay it back immediately, avoid shopping with credit cards. When the pinch of spending money is not immediate enough, you won’t realise how much you’re spending. So always stick to cash or debit cards while shopping.
Relax And Be Flexible With Your Budget
Budgets are just plans you’ve made for yourself to stay on track and be able to achieve your holiday goals. So don’t think of them as restrictive.
And, if you find that your budget is hard to follow, take a moment to look out and find out what exactly isn’t working. Tweak your budget accordingly.
Because, a flexible budget is the only budget that works.
Our aim is to spend money in a way that makes us happy, not to obsess over it and then feel guilty when you make a mistake. Accept that mistakes are bound to happen and make changes. In this way, you can take out all the negative feelings associated with holiday spending and really enjoy the festivities. Also, it will help you start off the next year fresh and with positivity!
Over to you
Do you have a holiday budget? And, what’s your number one tip to stick to it? Let us know in the comments section below.
Also published on Medium.