Stressing your holiday budget? You’re not alone. It’s a tricky subject. Holiday priorities can shift from year to year, and let’s face it, it’s not like your typical monthly expenses just disappear once the festivities start.
According to the National Retail Federation, most Americans expect to spend around $875 total during the 2023 holiday season. That’s almost half of an average month’s rent in the U.S. — talk about holiday stress!
Remember, the goal is to create a holiday filled with joy and memories, not debt. So keep your budget in mind, plan ahead, and make smart spending decisions that will last long into the new year. With a little effort and discipline, you can have a memorable holiday while staying on track financially.
How to budget for a holiday: Know your spending pattern
The first step to creating a holiday budget tailored to your needs is understanding what you’ve spent in the past. Look back over previous holiday seasons for valuable insights. Tally up the shopping, decorations, travel, food, and other holiday expenses last year. Look for trends or patterns. Are there areas where you tend to overspend? Do you see anywhere to reduce seasonal expenses without feeling like the Grinch?
Consider your current finances
Next, consider your current financial situation, including income, savings, and any upcoming financial obligations. Be realistic and budget holidays to align with your long-term financial goals. Future you will want to have a fun time with loved ones, too! As anyone who follows the FIRE Movement can tell you, solid planning now will help ensure that the season will only get brighter as the years go by.
Plan for holiday surprises
Don’t forget to factor in unexpected expenses. It goes without saying that this is not the time to ignore your emergency fund. The holidays can be full of surprises, so it’s always a good idea to have a cushion in your holiday budget for any unforeseen costs that may arise. Remember that the goal is to enjoy the season without breaking the bank. This includes ensuring you’ve got emergency cash on hand, just in case.
Craft a realistic holiday budget
A realistic holiday budget provides a clear roadmap to follow throughout the season, allowing you to enjoy the festivities without worrying about overspending. Consider the cost of holiday gifts, gift wrapping, holiday decorations, travel, food, and any other seasonal expenses, and set a cap for each spending category.
Be honest about what you can afford and what is truly important to you and your family during this time of year. Let your priorities guide where you focus your budget, and adjust spending accordingly. If you want more quality time with family members, plan to spend more on holiday travel or hosting holiday parties. If gift-giving is your love language, allocate more of your budget to your shopping list.
Stay on track with your holiday budget
The easiest way to stay on track with your holiday budget is to go old school and write it down. Create a paper or digital budgeting worksheet outlining your spending limits in each category, and check in regularly to ensure you’re still on target. If you already have a budgeting app you love, that’s great too. Just try not to spend extra money on something you know you won’t use in the new year.
Maintaining a good credit score is important for your personal finances, so try to avoid going into credit card debt. Only charge as much as you feel comfortable paying off in the short term, and use a rewards credit card to take advantage of potential savings. If you’re tempted to overspend, consider putting your credit card aside for the holidays and using a debit card instead. Using cold hard cash is also a great idea. Studies have shown that people tend to find saving money and prioritizing purchases easier when using physical money, with most consumers spending anywhere from 12% to 18% less.
Plan purchases in advance and make it a priority to avoid impulse buys. Take the time to research prices and retailers, compare online shopping deals, and make a specific gift list. Planning ahead lets you take advantage of sales and discounts and potentially helps you stay under your spending limit.
Invest in Your Future
If all of this sounds like a lot of pressure for the most wonderful time of year, consider making a game of it. Look at any potential savings on your holiday budget as a win for your bank account (and your financial future). Make a deal with yourself to stick to your budget. Set aside a percentage of your holiday savings in your savings account. Use that extra money to put something special under the tree for yourself next year.
Remember that holiday spending should constitute a small part of a much larger money management plan. Consider today’s spending (and saving) as an investment in your future. In the same way that real estate investment is a key to building wealth, creating a holiday budget now can help you afford bigger and brighter festivities with family and friends in the coming years.
Investing your holiday savings could help you grow your net worth for future years. Arrived offers two options to help anyone invest in real estate. With Arrived’s individual property offerings, you can hand select the single family residential and vacation rental homes you want to invest in. Rather keep it simple? The Arrived Single Family Residential Fund includes expertly chosen rental properties starting with a $100 minimum investment.
The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. The views reflected in the commentary are subject to change at any time without notice. View Arrived’s disclaimers.
