By Daniel Rodriguez | Dr. Budgets
Happy Holidays! It’s that time of the year again… time for family and loved ones, time for big feasts, and time for… holiday spending. Many people spend more on gifts during the last month of the year that they did the prior 11 months combined. And, after you factor in holiday parties, wrapping paper, holiday cards, festive attire, postage, and everything else, it can all add up! Holiday spending is deserving of a line item in your budget. If you aren’t sure what that means, then read on!
If you are reading this at the end of the year, then there isn’t much you can do to plan for the current year, so do the best you can with this year’s gifting. What we do in our household is plan for next year’s holiday spending at the end of the current year so that we can build that amount into our spending plan at the beginning of the year. Below are three steps you can follow to do the same.
Step 1: Determine How Much You Spent. The first step is to determine how much you spent this past holiday season. Try to account for everything so you can build it all into your budget. Here are some things you might consider:
- gifts to friends and family
- wrapping paper, bows, ribbons, and bags
- stockings and stuffers
- holiday cards and postage
- tree and decorations
- holiday traditions such as theater tickets or family pajamas
- hostess gifts, office collections, and teacher gifts
- charitable giving
- white elephant gifts and secret Santa gifts
- gifts to service providers like your housekeeper, massage therapist or favorite server
Step 2: Determine How Much You Will Spend. The next step is to use the information from step 1 to determine how much you will spend next holiday season. Think about who/what you need to add (or subtract) from your holiday spending list from the past year (my wife and I track our holiday spending on a simple spreadsheet, which makes it easy to update each year). Also, I’d encourage you to think about where you received value out of your holiday spending. Is there anything you’re doing just for the sake of doing it? Does your family enjoy driving around looking at lights (which is very low cost) more than sitting in traffic to attend the (much more) expensive holiday festival? It’s okay to stop doing something if it doesn’t bring you joy.
Step 3: Divide Total Holiday Spending by 12. Finally, add up your total holiday spending from step 2, then divide that number by 12. In January, start setting that much money aside each month so that come December your “holiday spending budget” is fully funded. You might consider opening a specific account for this money so that it’s all there come December.
This might seem simple, but I have found that few people plan their year-end holiday spending. Hopefully, if you are one of those people, this post gives you the motivation to do it for the upcoming year!
Bonus: You can use this approach for any expense that only happens annually, like insurance payments, property taxes, auto service, or health expenses.
Also, I feel that it is very important to say that the holidays are not something for which you should go into debt – this can cause a great deal of stress and, frankly, it’s just not worth it. Your friends and family love you, not what you buy them. This is a magical time of year and my wish is that people can enjoy it without stressing out over money.
If you know someone who needs more hands-on planning for their overall spending (not just their holiday spending), have them schedule a complimentary consultation today to see how we can help. Wishing you a wonderful holiday season and Happy New Year!