How to Set Up Your Holiday Budget
Have you made your list and checked it twice this year? If not, don’t sweat it – we’re here to help you plan for the holidays while keeping your finances in check. With the holiday season just around the corner and inflation looming in the back of our minds, it’s more important than ever to set up a holiday budget. According to Deloitte’s 2022 Holiday Retail Survey, the average household will spend $1,455 on holiday expenses. Read on to learn how to better manage your seasonal expenses by setting up a holiday budget.
1. Determine your spending limit.
If you’ve set aside money throughout the year in a sinking fund, you’re ahead of the game. Check-in on how much is in the fund now and determine how much more you can bank between now and when you need it.
Alternatively, if you’re starting from scratch, a good place to begin is by looking at your bank and credit card statements from last year’s holiday season to get an idea of what you spent. A good rule of thumb according to CNBC is to spend no more than 1% of your annual income on holiday gifts and travel – so if you make $60,000 per year, you should consider spending no more than $600.
2. Make a list of all holiday expenses.
Once you’ve determined your spending limit, make a list of all holiday expenses that are applicable to you. Those expenses may include:
- Food (outside your standard budget)
- Tips and gifts for service providers
- Gift wrapping supplies
- Charitable donations
- Cards and postage
- Holiday activities
3. Set your priorities.
Now that you’ve got a list of all holiday expenses that are applicable to your unique situation, it’s time to check that list twice. Do you really need to send a holiday card this year? That could be a savings of anywhere from $100-$500. Alternatively, maybe it’s not in the budget to take that elaborate family vacation this holiday season. Start your own traditions at home! You’ll have a more relaxing and enjoyable holiday season if you set your priorities and stick to a budget instead of breaking the bank.
4. Allocate funds.
Your budget is set, and your priorities are determined, so now it’s time to allocate funds to each of your holiday expenses (from step 2). This will vary from person to person based on budget and priorities, but below we’ve listed the average expected holiday spend by category according to Deloitte’s 2020 Holiday Retail Survey:
- Gifts: average cost $487
- Travel: average cost $260
- Entertaining at home: average cost $205
- Non-gift purchases: average cost $435
5. Track all expenses and purchases.
Once you begin shopping and checking things off your holiday to-do list, it’s important to keep a detailed list of all your purchases, including the prices. Additionally, make sure you keep track of the costs for any holiday-related outings or experiences (like going to the movie theater or ice-skating rink), as this will ensure you’re on track for spending this year and will help you when planning your holiday budget for the following year. When you make any holiday-related purchases, subtract the amounts from your overall budget – this will keep your holiday expenses in check.
- Plan ahead. Take advantage of Black Friday, Small Business Saturday, and Cyber Monday deals. These pre-holiday sales are a great way to get ahead of your shopping lists and save some money.
- Shop online and search for the best deals. While shopping in-store may help you get in the holiday spirit, you may find that you can save some money (and time) by online shopping. Online shopping also lets you price compare, so you’re guaranteed to get the best possible deal. Additionally, if you sign up for a free service like Honey, you don’t even have to search for coupons and savings – the plugin searches the web and applies the best coupon codes to most online shopping carts.
- Consider a seasonal side hustle. Need some extra cash this holiday season? You’re in luck – many retailers and delivery services are hiring for extra help at the end of the year.
- Do it yourself. The items on your holiday list don’t always have to come from a store. In fact, some of the most meaningful gifts and decoration objects are DIY projects. Homemade décor, wrapping paper and bows, and gifts are a great way to save some money this holiday season.