How to Budget for the Holidays
The holidays are rapidly approaching—which means quality time with family and friends. But it also means additional expenses.
We all want to give our friends and families wonderful gifts during the holiday season. While this is a noble goal, it is important that we do so responsibly. Here are some ways we can proactively budget for the holidays!
Financial planners recommend spending no more than 1.5% of your annual income on holiday spending. If this amount does not seem like a lot, it is. If your annual salary is $35,000, 1.5% works out to $525—which is a pretty significant amount of money!
Nevertheless, there are many ways that we can be proactive about budgeting for the holidays. That’s why our team has compiled this list of spending tips to help you navigate the sales this year:
1. Create a list of expenses and set spending limits
When planning for the holiday season, we suggest beginning with a list of projected expenses, including gifts, cards, wrapping supplies, charitable donations, and entertaining expenses like food, drink, etc. From there, you can begin to budget how much you can reasonably afford to spend on gifts and avoid spending money that you don’t have.
Practical Money Skills Canada has created a helpful budgeting tool to help Canadians accomplish this task.
If you find that your projected spending is above the amount you can afford to reasonably spend, reconfigure your budget. Remember—there is no spending threshold for love.
2. Make a shopping list and cruise the sales
Compile a list of one or two affordable gifts for each person on your list. If you take the time to plan ahead, you may be able to save a significant amount on some or all the items.
Tools like the Flipp app (available on iOS and Android) can be programmed to send notifications when certain items go on sale, but did you know that there is a reason that certain items go on sale at certain times of the year?
As The Balance reminds us, when demand is high, prices are high and when demand is low, prices are low . Often, we think we are getting a great deal during Black Friday and Cyber Money, but studies show that there is generally not a huge difference between these one-day promotions and regular holiday sales.
However, there are certain industry-specific bargain sale months when certain items tend to go on sale. For example, appliances and electronics both tend to go on sale from December to January because new models are introduced during the spring, while furniture tends to go on sale around Labour Day weekend when summer sales begin to cool down.
To learn more about these industry-specific bargains, check out this excellent resource from The Balance!
3. Keep track of spending
We live in a digital world. Websites like Amazon and Walmart have made shopping for the holidays as simple as pressing a button. With that being said, the best way to keep track of your spending during the holidays is to stick to a cash-only system , as credit cards make it far too easy to overspend.
Of course, we know that this is not always feasible. Therefore, if you are planning to use a credit card this holiday season, we suggest regularly reviewing your monthly statements and paying down your balance immediately and in full, if possible.
Additionally, if you are not yet earning rewards on your spending, contact your financial institution to see if you qualify for a rewards card and get something back for what you are putting out!
4. The best gifts cost nothing
While expensive luxury items are certainly nice to receive, nothing beats a heartfelt gesture. Homemade presents are a great way to save money while creating something memorable for those close to you—gift a photo to your parents or grandparents or bake cookies for your child’s teachers. For more ideas, check out this great list of cheap, yet thoughtful, gifts that can be purchased for $25 or less from Prevention Magazine!
The holidays can be stressful, but it is important not to lose sight of what really matters. Remember that the holidays are a time to relax and recharge, to be grateful for what we already have, and for the people around us. Managing expectations, both of yourself and others, is the best way to retain control of your financial health during the holiday season!
If you need help creating a budget that works for your particular situation, contact our team of Licensed Insolvency Trustees today!