Develop Your Holiday Spending Plan

The holiday season is here – is your budget set? Read our blog for best tips on planning your holiday spending.

A spending plan, also known as a budget, is a simple equation: Income – Expenses = Zero. But a budget is rarely simple. Use our four-step guide to build a holiday spending budget that works for you.

Steps To Follow  

Step One: What Matters?

Before moving forward, consider what matters most to you. Ask yourself these questions:

• What do you love most about the holiday season?
• What seasonal activities put you in a holiday mood?
• What activities are absolutely necessary for your holidays to feel complete?
• What traditions/activities, if skipped, wouldn’t be missed?
• What traditions/activities cause a high level of stress for you?

Talk with your family and friends about their thoughts and expectations for the holidays. Keeping these in mind, you can develop a plan that prioritizes your time and money.

Step Two: Sources Of Spending Money

With holiday budgeting, it’s important to first determine how much you can afford to spend by evaluating your sources of spending money. They could include funds from a dedicated savings account, checking account, credit card, or loan.

If you plan to borrow for the holidays, keep these tips in mind:

• Use one credit card or one loan, preferably the one with the lowest Annual Percentage Rate (APR)
• Don’t charge or borrow more than you need or budgeted
• Keep track of all expenses
• Pay off your holiday balances or debt as soon as possible

Not sure how much you should spend on the holidays? One rule of thumb is to spend no more than 1.5% of your annual take-home pay. So, if your net pay (how much you make after taxes and deductions) is $50,000, you should plan to spend no more than $750 on the holidays. Remember, this is just a guideline. You may need to adjust this number based on your current financial situation or comfort.

Once you know how much you can afford to spend, it’s time to break down your holiday expenses.

Step Three: Expenses  

Make your list and check it twice! Use the Holiday Budget Worksheet to list everything you need and want to spend money on this holiday season.

1. Write your total holiday spending budget at the top.
2. Divide that total among the different categories (gifts, travel, food, décor, entertainment, and other). Keep your answers to the “What Matters” questions from above in mind as you make these decisions.
3. Once you have the total budget for each category, think about what you need to purchase in each of those areas.
4. For your gift budget, use the Holiday Gift List Worksheet to plan out your holiday giving then divide your budgeted gift amount among your gift recipients.
5. Research prices and stores to find the best deals and make sure you don’t go over your limit.

Step Four: Track, Track, Track

Now that you have your plan, it’s time to follow it. Make sure you’re keeping receipts and updating your budget and gift list regularly.

Summary  

The holidays can be a time of stress or a time of enjoyment with family and friends. With a little planning, you can make your holiday season one to remember.