Stay Out of the Red This Holiday Season
The holiday shopping season is upon us, with festive celebrations just around the corner. Unfortunately, this time of cheer is often accompanied by excessive spending. This year, when it comes to taking control of holiday spending, start by looking in the mirror.
According to an annual survey by Deloitte, spending on gifts accounts for just $554 of the estimated $1,652 that survey respondents indicated they plan to spend over the holidays in 2023. The rest will go to non-gift items—the stuff we buy for ourselves—as well as "experiences" such as entertaining at home and socializing outside the home. In fact, "experiences spending" was anticipated to make up the largest portion of respondents’ holiday spending—$632.
You might be tempted to play things by ear this holiday season: Only 57 percent of survey respondents said they expected to stay within a fixed budget. But if you’re not careful, these expenses can add up quickly. These four steps can help you set, and keep, a thorough holiday budget.
1. Budget for "self-gifted" items, entertaining and socializing. Holiday sales events—now sometimes spanning entire weeks—have become hard-to-resist shopping opportunities for household and personal expenditures. In Deloitte’s survey, 82 percent of respondents indicated they were planning to shop for non-gift items. Prices might be good, but ask yourself if it’s worth spending the money or incurring credit card debt.
If you plan to entertain guests or celebrate outside your home during the holidays, be sure to include estimates for these costs in your budget, too. And consider using money management apps to help you stay on budget.
2. Check your holiday list for unnecessary expenses or items that you can purchase at some other time of the year. The goal of this list is to itemize expenses that fall outside of your normal monthly spending so you don't spend too much. While highly promoted sales events might be tempting, many items are available for similar prices in various sales throughout the year, so don’t feel pressure to buy during the holiday season to get a good deal.
It's also a good idea to designate which items you intend to purchase with cash and which gifts, if any, go on a credit card. This can help you control credit card spending, which can negatively impact your finances long after the end of the holiday season.
3. Compare your list to your regular and out-of-pocket monthly bills, such as mortgage or rent payments, car loans, utilities and expenses like gas and dining out. You can use this as a guide for your holiday budget—allocating the amount you typically spend on meals out toward holiday dinners, for instance. Make sure you’re prioritizing the necessities over seasonal extras. For example, 48 percent of Deloitte survey respondents whose student loan payments restarted this fall said they planned to cut back on holiday expenses.
If you don't already track your monthly costs, start now. You can use this worksheet to track your spending.
4. Look for ways to save. Now that you can see how you spend—and plan to spend—your money, look for ways to save. Some strategies might be simple, like cutting back on holiday entertainment or decorating costs. You might look for free or low-cost holiday events, try a potluck dinner instead of a catered meal, or propose a “Secret Santa” style gift exchange rather than buying presents for everyone on your list.
The holiday season is also a good time to review your current cell phone, internet or streaming packages and inquire about special offers that could save you money for many months to come (but be sure to read the fine print).
Taking control of holiday spending is a gift that can pay big dividends in the coming year. If you do well, you can accomplish other financial goals, such as building up your emergency fund or increasing your retirement savings.
