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How to Plan Your Holiday Budget

How to Plan Your Holiday Budget

November 22, 2022
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As Andy Williams sang, the holidays are "the most wonderful time of the year." During the holiday season, families and friends bond and enjoy time away from work, take trips, eat delicious food, and exchange gifts. While the holidays are warm and memorable, if we're honest, the holidays can also get expensive. 

If you have a lot of family members, or even if you have quite a few friends, you may feel inclined to go all out on holiday shopping because you don't want to exclude anyone. 

However, a holiday budget can help prevent you from overspending on holiday gifts. It can also save you from incurring debt that might be harder to pay off later. Financial planning doesn't only matter when it comes to investments and retirement accounts, but it impacts every aspect of your life. 

Do you want to be more disciplined about your holiday budgeting? Our financial advisors are here to offer some holiday budgeting tips.

Prepare a Budget Before Holiday Shopping

It takes a lot of discipline to prepare a budget before shopping, especially when it comes to online shopping. It's easy to add things to the online cart without realizing how much you're spending. E-commerce sites offer many gift ideas, causing a person to want to buy almost everything they see, which is why a spending limit matters.

Create a Shopping List

Creating a budget will be simpler if you write down the people you want to give gifts to and what you'll buy them. Lists keep you organized and reinforce that you have a spending goal in mind. You can always cut your list down if you realize you're overspending. 

Make Homemade Gifts

If you're crafty and creative, creating a homemade gift is a warm sentiment from the heart. You can knit someone a blanket or sweater in the person's favorite colors, bake cookies or a cake, and many other things to personalize a gift, all while saving money. The fact that you've prepared the gift yourself is equally appealing as buying a store-bought gift. 

Pay for Things in Cash, Using Your Debit Card, or Take Advantage of Credit Card Cash Rewards

During the holidays, you might feel swipe friendly. After all, seeing someone excited about a special gift you bought them is magical. Still, using cash or a debit card (which acts as electronic cash and only allows you to spend the money you have) saves you from looking at incurring credit card debt after the holiday season ends. 

If you're going to use your credit card, you can use it to your advantage. Credit card companies give users cash rewards for purchasing gifts from certain businesses. For example, with some companies such as Macy's, you can receive a particular percentage of the amount you spent back in cash rewards. Suppose you spend $300 in Macy's, and your cash rewards state that you can receive 5% back. You'll earn $15 in cash rewards. 

While $15 might not seem like a lot of money, you might be surprised at how many retail stores, restaurants, hotels, airlines, and trip-booking agencies (such as Expedia) have deals with various credit card companies. The rewards cash can add up quickly.

You can apply these cash rewards in many ways. While these rewards don't count as a credit card payment (you'll still have to pay your monthly bill), some people use the cash accrued to lower their credit card balance. Other people use it to go on free flights or add to their travel miles, which helps when planning a family holiday trip. 

Try Out Rewards Programs, Promotional Deals, and Outlets

Many people hear the words "rewards program" and become skeptical because they think this means signing up for another credit card. But many retail stores offer free rewards programs, and the deals only get better around the holidays. Providing a retail store with your phone number or email doesn't cost anything. You'll be able to accrue points (which results in discounts) and see exclusive deals. 

The key here is signing up for rewards programs from companies you genuinely enjoy shopping at to cut down on irrelevant marketing emails flooding your inbox. Fortunately, you can always unsubscribe from marketing emails. 

Even if you aren't a rewards member, visiting online sites or physical stores is always worth it to see what bundles they offer. Stores continually advertise buy-one-get-one-free holiday sales. If you prefer giving high-end brands, consider visiting an outlet mall that features name-brand products with lower prices. 

Pay Attention to When You Book Holiday Vacations

While some families love to spend the holidays at a loved one's home, other families enjoy traveling during the holiday season. If you love family getaways, we suggest paying attention when you book these vacations. 

Try booking these trips several weeks in advance to combat high-demand prices. According to Nerd Wallet, you can use Google Flights to find the most cost-effective days to book your trip. Google Flight cross-compares flights from multiple airlines to get you the best deal.

Nerd Wallet also lists the least expensive days to travel around Thanksgiving as such: 

  • The Saturday, Monday, and Tuesday before the holidays
  • The Wednesday after the holidays
  • Black Friday
  • The Tuesday after Thanksgiving 

For Christmas, Nerd Wallet reported that 68% of people depart on the 21st-23rd. Therefore, it's worth booking a trip before these dates. The most expensive itineraries are those week-long trips from December 21st-29th. 

It also matters where you travel. Many people go to warm-weathered places such as Florida, Mexico, the Dominican Republic, and Jamaica for cost-effective trips and use sites such as Expedia, Booking.Com, Trip Advisor, and select resort websites to save money. 

Count on a Financial Advisor to Help You Reign in on Holiday Spending

If you overspend during the holidays, you aren't alone. Many Americans see a drop in their bank accounts around the holiday season. According to CNBC, 1 in 3 Americans overspent during the holidays in 2021, boosting credit card balances. One-third of shoppers also went more than $1,000 in debt. Fortunately, a financial advisor can keep you on track when it comes to saving money.

The JL Smith team provides our clients with a clear picture of their finances with a cash flow analysis. We can also teach you about online financial safety and inform you of holiday scams. Essentially, financial advisors keep your best interests at heart and are around to help you maintain healthy spending habits. Contact the JL Smith team today to schedule a free consultation and learn all about the benefits of having a financial expert on your side.