Holiday saving can be a struggle. Budgeting and planning ahead can save you from the headache of overspending. Here are four tips to stay on top of gift-giving.
Financial peace in December starts in January.
Setting up an automatic transfer into a savings account that's labeled "Holiday Spending" or "Holiday Saving" can help. Even $50 per month becomes $600 by Christmas when we start in January.
Research shows that when we rename our savings accounts, we are much less likely to tap into it early or use it for some other purpose besides holiday spending.
It's not too late to start budgeting.
Start by backtracking. Peek at your credit card statements from last year for a reference point on how much you typically spend. Look at gift-giving, travel, and food expenses.
A holiday budget should include every expense related to the holidays. Leave room for donations, events like the office gift exchange, and other extras that may not be planned in advance.
Don't forget to break up your spending into categories.
Plan a total to spend and then break it up into smaller categories. Gifts, travel, groceries, decor — everything should have its own fund. Put aside enough money for each category and add a 10% spending cushion.
There will always be things that sneak up, weren't planned for initially, or cost a little more than expected. The point of budgeting isn't to "nail it." The point is to give yourself the flexibility to spend within a healthy boundary.
There are many tools that can help with holiday spending.
Santa's Bag is an app that tracks your holiday gift spending in real time. It also allows you to set funds per person or per event. The app is helpful for tracking expenses as you go. It costs a few dollars.
The four gift rule can be helpful for parent's shopping. The rule requires one gift the kid wants, one they need, one they can wear, and one they can read.
Visit extension.usu.edu for more budgeting and money tips.
Transcript:
Shalayne Smith Needham
The holidays are joyful, but also stressful for many wallets. Before the costs pile up, we are going to talk about how to plan your Christmas budget, so in January you aren't stuck paying for December's fun. Amanda Christiansen, USU Extension professor, is joining us and you also know her for Smart Money tip segments featured here on Utah Public Radio. Welcome Amanda, it's great to have you here.
Amanda Christensen
Thank you, it's always great to chat. Thanks for having me.
Shalayne Smith Needham
And first, you suggest that we actually start our holiday spending and planning in January — tell us about that.
Amanda Christensen
You know, financial peace in December starts with a plan in January. So, setting up an automatic transfer into a savings account that's labeled "holiday spending" helps. Even $50 per month becomes $600 by Christmas when we start in January.
I like renaming that and calling it a holiday spending fund. Even though it's a savings account, it is money we are planning to spend, right? Research shows when we do that, we are much less likely to tap into it early or use it for some other purpose besides holiday spending. So that's a little pro tip there. And I think you can use spending this year as a realistic guide for how much to start setting aside for next year.
Shalayne Smith Needham
Well, I love that. Thanks for sharing that. And since we are in November and we don't have time, how can we start calculating now what we can actually afford?
Amanda Christensen
I like to tell people to backtrack. So, if you were to peek at last year's credit card statements, you would get some reference point to how much was spent on holiday gift-giving, travel, or even food related expenses sometimes show up if we shop at different places for the holidays. So, I like that idea.
Be sure that a holiday budget includes everything, so even the donations we plan to give, the extras like the office gift exchange, things that don't come up on the radar when we're maybe making our list initially. So just making sure that budget includes everything.
Shalayne Smith Needham
How can we use this budget we made in a way that benefits everyone on our list?
Amanda Christensen
I like to plan a total I'm going to spend and then break it up into smaller categories. So, gifts, travel, groceries, decor, may be how I break that up. So I make sure I've got enough money for the things or I'm considering. I should say, those categories, and what I might want to spend in each one.
I would recommend a 10% spending cushion, because there will always be things that sneak up that you didn't include or something that costs a little more than expected. And the point of budgeting isn't to nail it, it's to give yourself the flexibility to spend within a healthy boundary. A 10% spending cushion is enough, I think, to give you some leeway without a crazy amount of unplanned spending.
Shalayne Smith Needham
Well, this is all very helpful. Maybe share some tools that can help guide us through this process. One that you mentioned is Santa's Bag app, tell us about that.
Amanda Christensen
Yeah, this is an app that can help you track your holiday gift spending in real time. If you need to budget per person for gifts, that allows you to set up a per person or a per event budget and then you track expenses as you go. It tells you, easily, at a glance, how much you have left, which is really very helpful. I believe that one costs a few dollars. I think what you get, worth what you pay for there. So, that's a recommendation if someone's used to being on their phone all the time, that app could be really helpful.
Shalayne Smith Needham
What are some other resources?
Amanda Christensen
I like trying something like the four gift rule or framing your gift-giving so it's doesn't become a free for all. Helping with something they want, something they need, something to wear, and something to read. In my experience, if you do a little more planning, I think spending limits or categories like that create more meaningful purchases, and they give us the freedom to enjoy giving with a little less guilt.
