January tends to be a tough month for many people. The decorations have come down, the celebrations are over and everyone has gone back to work. Everyone is hoping to get through the winter without too much cold and snow. On top of that, many Americans are trying to stay on track with their New Year’s Resolutions and goals. Many people resolve to get out of debt and save more money. This can be a daunting task when you are cringing in horror at the credit card bills you racked up over the past month. Just like a real hangover, if you have a holiday financial hangover, you are probably swearing you will never do this to yourself again. So how do you prevent a holiday financial hangover?
The reality is there is only one way to prevent a holiday financial hangover. You have to sit down and write out a budget plan for next December and begin saving now. Most Americans truly don’t know what they spend at the holidays and most usually overspend. If you don’t want to face a high credit card bill every January, now is the time to plan out your holiday budget. You can do this in just a few simple steps.
Write out a list of gift recipients
The first step is to sit down and write out a list of people you buy gifts for or may have to buy gifts for. Go through your receipts and credit card statements for the past month and think about who you bought presents for. This includes immediate family, extended family, friends, co-workers, teachers, hairdressers, garbage men, etc. When you are finished, review the list with your spouse or significant other if you have one. They may think of people you missed.
Purge Your List
Look at your list of gift recipients and decide who should stay on the list. Eliminate those that don’t belong. Do not keep people on the list out of guilt or because you feel a gift is expected. Decide now if you would rather participate in gift exchanges, secret Santas, white elephants, and family gift exchanges. For many years, my husband’s out of state family included us in their gift exchange. One day I sat down and I realized it doesn’t make sense for us to be involved. We didn’t have the joy of seeing our gifts opened and neither did the person sending gifts to us. Also, because we were out of state, there was the added cost of postage. So I contacted my husband’s aunt who organizes it, explained my thoughts and we politely declined to participate anymore. To be honest, it was a relief.
Set a Budget Amount for Each Gift Recipient
Now is the time to set a budget that you can stick to for each person that you purchase gifts for. Too often we let our feelings for the people we are buying for dictate the amount we spend versus what our budget can actually handle. You should not be deciding your budget as you shop when it is much harder to say no to overspending.
Write Out a List of all other Holiday Expenses
Besides gifts you probably spend extra money on many other items over the holiday season. You need to write those down too. Here is a suggested list of expenses to get you started.
- Christmas Tree (If you buy a real one or you need to replace your fake one)
- Christmas Cards
- Postage and Shipping
- Holiday Brunches, Lunches or Dinners
- Christmas Eve and Christmas Dinner Groceries
- Baked Goods
- Gifts for Pets
- Holiday Clothes
- Pictures with Santa
- Family Outings to Christmas Events such as skating ponds, holiday villages, etc
- Gift Exchanges
- Wrapping Paper, Bows, Trim
- Holiday Travel
Set your budget for Holiday Expenses
If you have your receipts from this past year, go through them and set a realistic budget amount for each item you listed above. Do not put down $20 for a tree if you know you usually spend $80.
Total Up Your Expenses
When you have completed your list of holiday gift recipients and expenses, add the amount you budgeted for each category and divide by 12 or the amount of months left until Christmas. This is the amount that you must set aside each month in order to have enough money to pay for your holiday expenses. Warning, you will be shocked at how much your holiday expenses truly cost.
Purge Your List and Cut or Lower Expenses
If the monthly savings amount you came up with after writing down all expenses is more than you can afford, you will have to make some changes. I recommend going through your list and purging anyone else you do not really need to give a gift to. You should also go though your list and cut any unnecessary expenses. Maybe you don’t need new wrapping paper or decorations this year. Finally, if you cannot afford the amount you came up with and there is no one left to cut, you will have to go through your list and lower the amount you budgeted for each person and category. If you absolutely cannot cut further from your holiday budget, be creative and find ways to make up the difference.
If you know you will receive an extra paycheck during the year or a holiday bonus, plan now to set it aside for the holidays. Can you work extra hours or participate in side hustles to make up the difference between what you can afford and what you want to spend? Are you able earn extra money or gift cards online to help lower the cost of the holidays? If you have a creative side, can you create handmade gifts? Is it possible to regift an item that is still new that you don’t love, but someone else will? Remember regifting is tricky and it should only be done if you know the person will love it and you are sure the person who gave it to you will never know!
Save and Stick to Your Budget!
Now that you have created your list of expenses and your holiday budget, put the amount you need to save in your monthly budget and stick to it! You are going to feel so much better next January, when you are not suffering from a holiday financial hangover. So what are you waiting for? Get started and get your free holiday planner now!