You might not want to hear this.
“Nope, nope, nope,” you might say.
“It’s not even Halloween yet!” you may cry.
“I haven’t even begun to think about Thanksgiving!” you could argue.
It’s no use. The holidays are coming.
Did you set a holiday budget last year? Did you keep that budget? If you didn’t, don’t worry. That was last year. This is the year you’ll stick to your holiday budget – guaranteed.
How? By following these five simple steps.
Forget last year
One of the worst things we do to ourselves and our bank accounts is to treat gift-giving as a competition. Sometimes it’s a competition between ourselves and the people we’re giving gifts to, but more often it’s a competition with ourselves and what we’ve done in the past. We often feel compelled to escalate – to give more than we gave last time.
It’s not hard to see how that kind of attitude can be destructive. So leave it behind. Forget what you gave and how much you spent last year and the year before and the year before.
Wipe the slate clean. Everyone’s ability to spend during the holidays is going to change year-to-year, so don’t concern yourself with what you were able to do in the past - it has no bearing on what you can and will spend this year.
Set your spending limit
According to the National Retail Federation, the average American household plans to spend approximately $750 annually on holiday shopping. How much should you spend?
Good question. Ideally the answer is “However much you budgeted for at the start of the year,” but there’s a good chance your budget is a bit more fluid than that.
So you’re going to have to look at two factors: how much you have saved and how much you can borrow/charge and have paid back in a reasonable amount of time. What’s important is that this number lives inside a vacuum – it has no relation to what you’ve spent in the past, what your parents are spending, what your friends are spending, what your ex is spending, etc.
Look at your money and decide on a reasonable spending limit for you.
Write that number down. You are not going over that number.
Divide it out
Now that you know how much you’re spending, you can create a rough holiday budget. Set aside money for every gift recipient, while making concessions for any additional holiday-related expenses, like cards or special food purchases.
Start keeping score (the fun and healthy way)
Here comes the fun part.
Download and print out a copy of the Holiday Gift Tracker. Fill out the first two columns with the names of each gift recipient and the amount you’ve allocated to spend on them.
Now you can start shopping.
Of course, the amount you actually spend is not going to be exactly the same as the amount allocated. On your gift tracker, write down the actual amount spent in the third column.
If you’ve ever played golf (or mini-golf) you’ll know how the fourth column works. Basically, the “Planned” column is the “par” for everyone on your list, while the “Money Spent” column keeps track of your “strokes”.
When you spend more than you planned, you’ve gone “over” for that gift, but that’s okay. You can make it up on the next one! As you buy gifts, you can keep a cumulative score in the “Difference” column. It’s okay to go over on some gifts, but then you need to go under on others in order to bring your score back down.
The ultimate goal is to end up at $0 when all the shopping is done.
The point is to be flexible, but not to lose sight of your spending limit. It’s too easy to say “no big deal” when you go a little over on a present, but if you find yourself saying that after every present you’re on your way to a budget meltdown.
Keep each other honest
If you’re self-motivated and honest, the Holiday Gift Tracker is a great way to keep your spending on track, but when you’re only answering to yourself it can be hard not to cheat.
So consider finding a spending buddy or forming a holiday support group. You can help each other find deals on gifts, but more importantly, you can keep each other honest and on-track.
The holidays are a celebration of family, friendship and togetherness. The memories you make will last you a lifetime, but there’s no reason to take on a lifetime of debt as well. If you stay flexible, have fun and never lose sight of your spending limits, you’re bound to have an amazing time this holiday season.
It's never too early to start planning for the holidays (don't look at me like that). Get the jump on the season by visiting our Holiday Headquarters page for more great ways to save money throughout the season!