With fall coming to an end, the holiday season is fast approaching us. For many, this becomes the time of the year when spending money becomes second nature and budgeting becomes very tricky. According to the National Retail Federation (link https://nrf.com/topics/retail-holiday-and-seasonal-trends), Americans spent over $209 billion on holiday related purchases in 2020. Even during the COVID pandemic, the average person spent $998 on holiday and gift purchases. With higher inflation than last year and many items in short supply, this year people can expect to spend more. To mitigate the effects of inflation and not overspending, budgeting is essential. Here are some quick tips to follow to keep to a budget and have a fun holiday season.
Set a spending limit.
The first step in budgeting is to determine how much you can afford to spend in total. To minimize overspending and avoid accumulating debt, the amount you plan to spend should ideally come from your available cash and savings (not credit). You should also consider what other sources of money you can draw on. This may include a year-end bonus from your job or money in savings accounts. However, if you have money in your savings account that is supposed to go to a larger purchase (like a down payment on a house), you may want to consider whether it is worth dipping into.
Once you have determined your budget, the next step is to figure out what you will be spending it on. The best way to do this is writing a list of what you are likely going to purchase, this may include things such as:
- Wrapping paper
- Cards and postage
- Travel expenses
Set priorities and allocate funds.
Once your list has been made, begin assigning each item on the list a number based on priority. Reorganize your list with the highest priority items at the top. From here, you can begin to divide your holiday budget. Now is the tricky part for most people: determining how much you are going to spend on each item.
Keeping track of expenses.
Even with your list and your allotments for each purchase, you will need to make sure you are staying within your preset budget. To do this, keep a running tally of what you have spent. This way, you are not likely to spend your whole holiday budget in one place or go over it accidentally.
Making and sticking to a budget is very hard and requires discipline. Once the holidays are over, compare your total spending to the budget you made. If you stayed within your budget, congratulations! On the other hand, if you did not, don’t worry. One simple remedy is to start saving in January and set aside a certain amount each month to meet next year's holiday spending budget.
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