Updated 12/12/21. Original post 12/3/20.
Unfortunately, the COVID-19 Pandemic is still raging on. The holidays are coming up again and they are great for spending time with family and friends, but they can definitely burn a hole in your wallet and/or put you in debt if you are not careful about spending. They are one of the most expensive times of the year and the holidays are not always the happiest of times for some people. Per Investopedia, the average cost every American spends for holiday related expenses is $942. That’s a good chunk of money! Please don’t spend more than you can afford on other people. Your loved ones will appreciate just spending time with you, whether that is virtually or physically during the pandemic. In my opinion, the holidays are not about gifts and they are about spending time with loved ones. It’s important to keep that in perspective. Below are 3 tips that I have for spending during the holidays.
Allocate A Realistic Portion of Your Income For The Holidays
Like my #1 rule of money says, don’t spend more than you make. I don’t want you to spend money that you don’t have during the holidays and go into debt. And your family & friends wouldn’t want you to do that either. Obviously you can spend as much as you want as it’s your money and you are free to do as you please, but a good rule of thumb I follow is to spend about 1.5% of my annual income on holiday related spending. So if you make $50,000 then your holiday’s budget is $750.
Now your holiday’s budget not only just includes gifts for other people. It should also include any travel expenses or anything related to celebrating the holidays. Not all of us are lucky enough to live close to family or friends. So your budget should also include any travel expenses if you live far away. Also, don’t forget items like Hallmark cards (HAVE YOU SEEN THE PRICE OF THESE THINGS!!!!!) (create your own cards), wrapping paper, wrapping tissue, etc. All of this adds up.
If you like to splurge or if you have trouble staying within a budget, then I would recommend using cash over a credit card. Withdraw a fixed amount of cash to use as your budget and don’t spend anything more. Easier said than done, but it does help. Once you run out of money then you run out of money.
On the other hand, if you pay off your credit cards in full every month, which you always should do, think about using a cash back or rewards credit card so you earn money or points for your spending. This will allow you to accumulate cash back or points faster and you can use it on more gifts, travel expenses, or treat yourself with something nice. The holidays is typically a higher spending period for most Americans so why not get rewarded for your responsible spending?
Signing up for a credit card just before the holidays is an easy way to earn lucrative sign-up bonuses. The Chase Freedom Flex or Freedom Unlimited cards are great for holiday and everyday spending and I use both of them. The Chase Freedom Flex offers 5x points at Walmart and Paypal for Q4 2021 and the Freedom Unlimited offers 1.5x on every dollar spent. The Freedom Flex is literally a no brainer credit card to have in your wallet and the Freedom Unlimited isn’t too shabby as well.
Another tip when it comes to retail shopping is to use Rakuten where you will receive a check if you receive $5+ cash back every quarter. This is a great way to earn cash back. I don’t earn a lot of money, but at least it’s something and it can be lucrative if you like to shop. Rakuten gets a commission every time you make a purchase. I use a plug-in on Google Chrome that notifies me every time I can earn cash back when I visit a website that uses Rakuten, which is pretty nifty.
Start Saving Before The Holidays
Right after graduating from college and getting a big boy job, I remember doing the 52-week money challenge, where you save money at increasing rates for 52 consecutive weeks. Yes, it’s really a thing and it’s great for saving if you have never tried it before! But I decided to do it in reverse because I think it has one major flaw. That is trying to save $49, $50, $51, and $52 per week for weeks 49-52, respectively. Weeks 49-52 are right in the middle of the holiday season where spending is typically higher due to the holidays. If you did the 52-week challenge in reverse, you would have saved $1,368 before the start of December. Yes, the start of the year would be harder to save, but remember that you are saving for a good cause and it gets easier since the amounts will decrease every week.
I’m not a big fan of Black Friday mainly due to watching the South Park episodes… Just kidding, but it’s mainly because I don’t want to wake up early the day after Thanksgiving and try to fight mass amounts of people for deals. Some people in this world are literally cray cray… I’m not saying all of Black Friday is bad as I sometimes shop online that day or during the weekend or on Cyber Monday. There are some awesome deals that retailers offer and it’s a great way to save some money!
Similar to a business, I try to set my annual budget for the next year using my Cash Flow & Budget Templates at the end of the current year. I have a copy of my budget & actual spending and I just paste it into my new budget and update anything I see fit. I anticipate that my spending will be higher in December and set a minimum default budget of what I spent last year assuming everything remains the same. I see Christmas as almost a fixed expense because it’s a recurring thing that happens every year. My point is that I plan for the holidays and you should too! There are many ways to save money like stop buying your daily $5 holiday cup of coffee from Starbucks and bring your own coffee to work.
Make A List For Everyone You Need to Buy For
That could be parents, siblings, extended family, friends, co-workers, charity, and anyone else you can think of! Put them on Santa’s List! I will even go a step further and set a gift budget for every person. Sorry not all people have the same budgets on my list… It’s the thought that matters! But it’s important to know what you spend on every person on Santa’s List.
Another thing to consider is, does the person you are giving gifts to prefer one big gift or many smaller gifts? Every person is different and you know them best. Again, gifts are great, but spending quality time with loved ones around the holidays is probably something they prefer even more. I cannot state this enough times. Time is precious so use it with the people you love.
Lastly, make sure you track everything. I keep my list and track everything using Evernote on my phone. Evernote is simple and it helps keep everything in one spot compared to tracking e-receipts using gmail. Tracking gifts and gift prices for every person definitely helps me stay within my budget and hopefully it can help you too.
I will say it one last time… Please don’t spend money you can’t afford on other people. Your loved ones will appreciate just spending quality time with you, whether that is virtually or physically during the pandemic. In my opinion, the holidays are not about the gifts. They are about spending quality time with loved ones as time is precious and you don’t know how much time you have left.
