One way to ensure a joyful start to the new year is by managing your holiday spending wisely. While it sounds simple, how often do we actually stick to it? Here are a few practical tips to help you stay within a reasonable budget this holiday season:
### Create a Per-Person Holiday Budget
The National Retail Federation estimates that the average person will spend around $688.87 during the holiday season, with many relying on credit cards. If you only make minimum payments on a credit card with 18% interest, you could end up paying for this year’s holidays well into 2015! To avoid this, it’s crucial to set a budget. Start by determining a spending limit per person and make sure to stick to it. Try to pay for everything in cash. If it’s too late to implement this for this year, start fresh in 2013. Open a separate savings account specifically for holiday expenses. Set your per-person limit now and divide the total by 50 weeks. Deposit this amount weekly so that when the next holiday season rolls around, you’ll have less credit card debt to worry about.
### Set Goals for the Coming Year
Thinking ahead to the new year before you start your holiday shopping is a smart move. It helps you see where you want to be financially and how far you currently are from that goal. It also highlights the setback you could face if you don’t curb impulsive buying. It’s much harder to save for big purchases like a new car or home if you’re bogged down by high credit card payments.
### Leave Your Emotions at Home
Your emotions can heavily influence your spending during the holidays. It’s easy to get swept up in the joy of giving, especially to enthusiastic children. However, these emotions can lead to unnecessary purchases. Common triggers include convenience, envy, security, and excitement. The key is to recognize these triggers. When tempted by an unplanned purchase, go home and think it over for 24 hours. You might be surprised at how quickly the urge to buy fades away.
### Build Your Savings as You Go
While you’ll undoubtedly do some shopping, you can also use this opportunity to boost your savings. We’ve already suggested paying with cash as your best option during the holiday season. To take it a step further, pay with bills only and save the coins you receive as change. Collect these coins in a jar, and after New Year’s Day, deposit them into your savings account. Last year, I managed to add just over $20 to my savings this way. It may not seem like much, but it’s money I wouldn’t have had otherwise.
This holiday season doesn’t have to result in financial stress when the credit card bills arrive in January. Keep these tips in mind, and you might find yourself in a better financial position in the coming year.
Do you have any other tips for keeping holiday spending under control?