The holiday season brings many people great joy. But the holidays can also be stressful. Expectations about entertaining and gift giving can create a sense of exuberance that translates into a free-spending mindset.
If you are still paying off credit card debt from 2018’s festivities, incurring new debt, or even the thought of it, can create anxiety and put you in a precarious financial position. Avoiding overspending is fairly straightforward, but only if you have a plan and are disciplined.
Avoid overspending on the holidays
Create a master list of all the different categories for holiday expenses. Entertaining and shopping are good starts, but it’s better to provide as much detail as possible. Family gifts, office holiday expenses and gifts for friends are related categories that will help you focus on specific amounts that you need to budget.
Next, make a list of the items you’ll need. Ideally, your list should be created with software to make it easy to track and accrue expenses as they occur. Many people tend to underestimate the cost of entertaining, budgeting only for the food and drink, so budget for the extra expenses likely to occur as well.
To determine your budget for everything, create a spreadsheet of master categories and specific expenses. This can be done by establishing a total amount that you can afford, or by assigning amounts to the individual expense items and totaling them to determine whether that level is affordable.
Footing the bill: cash-only
A cash-only system is a foolproof way to stick to your budget. By using either a pre-loaded cash card or a service like PayPal that only disburses funds in your account, you can preempt the potential for spending more than you have.
Some experts advise using the envelope method. Just place cash in envelopes for different categories of spending and only take the envelope you need with you for that particular event or need.
Other strategies include setting up a holiday bill for yourself on the first of every month leading up to the holidays and forgoing subscriptions and discretionary coffee runs for several months. If you expect to receive a holiday bonus, consider allocating 15-20% of the total for spending and using the rest to retire debt or add to savings.
Planning for the holidays should not start the week before Thanksgiving. Experts advise starting on January 1 to prepare for the coming year. Building in extra months to save not only helps financially but it also increases awareness about expense-savings essentials like coupons, seasonal sales and travel planning.
Holiday travel is a big variable in terms of your budget, and pricing for airfare and lodging can vary. It is best to set up alerts and to accumulate points on airlines that serve your target routes to stay on top of the best time to book your flight. If you do use a credit card, make sure that you are maximizing points and travel advantages.
First Centennial Mortgage provides expert and committed service for home financing. We wish you the best for the holidays and invite all your mortgage questions for your home finance needs.