I love everything holidays; the ridiculous holiday-themed decor, people in faux Santa beards and elf costumes casually walking around the city streets, festive holiday parties, giving thoughtful gifts, and stuffing my loved ones full of food and warm boozy drinks (preferably with whipped cream on top). As you can probably tell, I can quickly lose myself to the holiday spending cycle. I must go into the holidays with a game-plan.
Getting a handle on my holiday money plan has taken a few years of practice, because it’s not easy! I’d love to share what’s worked well; let’s get through the holidays unscathed together. Here are six tips and tricks I use to manage my holiday spending.
1. Really, Really Prioritize
If you’re on some sort of budget, which most of us are (or should be), take some time to stew on what’s most important to you. What traditions do you really love, and which do you find yourself doing out of obligation? Unless you’ve got a bottomless bank account (well hello, sailor!!), there’s simply no way to do it all. To determine what you can do, I encourage you to say “to hell!!” with tradition for traditions’ sake. What do you like?
Most of the year, I think that most folks are good at this. (Especially if you’re the type to be reading a finance blog!) But even if we’ve decided that we want to prioritize, say, activities over material things or simplicity over clutter, it’s easy to lose sight of said priorities during the holidays. Take a deep breath (and a step away from the spiked nog), and consider whether holiday spending decisions reflect your year-round values.
2. Set A Budget (Duh) and Use A Budget Tracker
After you’ve thought about what you’d like to prioritize, it’s time to take a deep dive into your current financial status. Don’t you dare embark on December without looking at your bank account and determining, in advance, how much you can spend on the holidays. Looking at your available cash, what can you reasonably afford without going into debt, eroding your emergency stash, or missing your water bill? Whether it’s $100 or $1,000, use this number to guide your sleigh through the holiday season.
Letting your wants determine your financial destiny is a damning strategy; it’s always good practice to decide what you can afford first. It takes some extra planning, but going into the holidays without some protocol is like shopping at the supermarket hungry.
If you set $500 as your total holiday budget, that should include all holiday spending; gifts, extra nights out on the town, holiday entertainment and parties. I use a simple spreadsheet to track my holiday spending by category. I like making my own categories and having to physically input my own values makes my spending very real. But I know the kiddos like to use apps, so use Mint (read our mint review here), Personal Capital, Mvelopes, or your favorite budget tracker. Set up limits within the tracker so you know when you’re close to your limit. There are some holiday-specific apps, but they mostly only track spending on gifts.
3. Have Honest Conversations With Family Members and Friends
I have so many friends that are stressed by not only the obligation to get gifts, but also from receiving gifts that are—for lack of a better term—total crap. It’s a nuisance to figure out how to store or discard of unwanted gifts, and it just feels plain wasteful.
The reality is, the average person isn’t going to be able to buy a gift for every third cousin and Facebook friend AND pay bills AND save for long-term financial goals.
Throughout the years, my sister and I have done a good job of resetting gift-giving expectations within our family. We don’t get gifts for each other, and chip in for one nice gift for other members of our immediate family. And after a few years of practice, we are now very honest about what we want—and don’t want—from family. But I know not everyone has family that’ll react well to this conversation. My advice? It’s a long game; start the conversation this year to try and pare back present-buying for next year. I’ve always found that honesty works best; when I shifted from working in investment management to freelance writing, I had frank conversations with family about what I was capable of. They appreciated it and know I’m also expecting nothing in return.
I don’t get presents for friends (and vice versa) but that doesn’t mean I don’t do something nice for the special people in my life! I always write heartfelt notes, print out pictures, or prepare some sort of free or cheap gifts or treats for the ones I love.
4. Keep Your Long-Term Goals in Mind
Speaking of financial goals; keep them in mind this holiday season! It’s easy to lose track of all long-term financial goals when you’re caught in the sensory tornado that is the holidays. You’re attacked from all angles by “doorbuster” sales, fluffy sweaters, sick new gadgets, flashing lights, and enough Mariah Carey that you forget it’s 2017. It takes the stoicism of Mr. Spock to get through the holidays financially intact, and I find that visualizing your financial goals helps. Sounds wishy-washy as heck, I know, but you’re a lot less likely to Blitzen your bank account if you don’t lose sight of these goals.
You’re allowed to have fun and you’re allowed to break the rules a little, but you deserve more than the short-term gratification of shopping—you deserve financial security.
A couple of tricks: Keep your goals visible; I use the notepad on my computer desktop. You’d be surprised how much it helps! I also like to think of every purchase in terms of a compound returns calculator. Buy this cheese-ball Chanukah sweater now, OR have $1,000 in investment gains in 40 years!! If you’re putting a purchase on a credit card, calculate how much you’ll spend on that item if it takes you a year to pay it back.
5. Make The Activity the Gift
Everyone deserves to enjoy the season, regardless of financial standing. And the great news is that you don’t have to spend a lot of money to do this! Here’s a list of free, festive, holiday fun to get you started. Take it a step further and use one of these free holiday activities as a gift to a friend or loved one. My friends and I always pick a fun adventure or activity, like a hike or a trip, en lieu of a gift exchange.
If you were going to get festive holiday drinks with friends anyway, declare this to be the gift you give each other. If you’re lucky enough to see your parents during the holidays, tell them you’d love to take them out on the town instead of buying gifts. Make a thermos of hot cocoa and take them to a part of town that’s draped in lights. Blast your hot holiday tunes Spotify mix, and enjoy. Not to go all Cindy Lou Who on you, but spending time with our loved ones is the whole point of the holidays, anyway.
6. Start Planning For Next Year
If you consistently find yourself struggling to stay on budget or going into debt during the holidays, put on your big girl/boy panties and plan ahead for next year. Set up an online savings account specifically for holiday spending, even if you only move $25 or $50 per month into the account. The worst that happens is you save some extra scratch.