Staying financially afloat during the holidays is no easy feat. That’s why it pays to set a budget and decide exactly how much you want to spend before you go gift shopping. And once you have a budget, you have to do everything you can to stick to it.
So to help you stay on track with money this season, we called on two of our favorite financial experts for help: Stefanie O’ Connell, author of The Broke and Beautiful Life; and Priya Malani, co-founder of Stash Wealth, a financial planning firm for millennials. We asked them for some good rules of thumb for devising a solid holiday gift budget—and sticking to it.
Make a List (and Check It Twice)
“While it sounds a little tedious, we suggest making a list for all of the people you’re buying gifts for this season and assigning an approximate dollar amount-slash-spending limit by their name,” Malani says. “Then total up all the numbers. When you look at that number and compare it to what you have available to spend for the holidays, is it more? Is it less? If it’s more than you have to spend, you’ll need to adjust those numbers—and your expectations.”
Pay in Cash
Once you’ve determined your total holiday gift budget, withdraw that amount in cash, and use only that cash to buy gifts. “This helps you put a physical limitation on your holiday spending,” O’Connell says, “as opposed to using a credit card, where you can continue swiping until your budget is totally busted.”
(Image credit: Studio Firma/Stocksy)
“If you’re tight on cash this year, because you haven’t been automating money towards saving for the holidays, get creative,” Malani says. “You can cash in airline miles and give someone a magazine subscription, or gift someone in the family with access to your Netflix or Hulu account.”
Don’t Forget the Small Stuff
“The best thing you can do is create a plan of action now, before the craziness of the holidays gets out of hand,” O’Connell says. “Don’t forget about additional gift-related expenses, like gift wrap and postage.” Once you’ve tallied up your anticipated costs, see how it matches up to your budget. Then you can cut back or streamline if need be. “For example, instead of getting a gift for every member of your family, maybe you can give a group gift,” O’Connell says. “Or maybe you can reach out to your siblings to go in on one nice gift for your parents.”
And for next year…
Set Up a Holiday Savings Account
“The best way to budget for holiday gifts is to set aside dedicated savings for gifts throughout the year,” O’Connell says. “For example, you can create a separate ‘gift’ savings account and transfer between 2 to 5 percent of each paycheck to that account throughout the year—withdrawing from it for birthdays, weddings and finally, the holidays. That way, it’s what you already have saved that dictates how much you can spend on the holidays; not how much items cost that dictate how you spend.”