The holidays are here and with them the sales!
But let’s be realistic: no matter how good the sales are, the holidays are just expensive.
From buying gifts for everyone you know, to delivering food to every holiday party, to decorations, to food, to travel expenses…
Your wallet may need a breather after the holiday season.
But you don’t have to pay. And in fact, you can take advantage of some of the best deals of the year without going into debt.
Why having a holiday budget can save your bacon
Holiday shoppers spend an average of $1,455 each, according to a Deloitte survey. And more than 60% of these consumers live paycheck to paycheck.
It’s a frightening combination, especially now, given that tech companies have lost more than 100,000 jobs and interest rates are rising at historic rates.
With higher interest rates comes an increase in the annual interest rate on your credit card – some cards charge more than 30% per annum if you don’t pay off your balance in full each month. It could cost you an additional $436+ in interest alone if you put an average of $1,455 on a credit card and don’t plan to pay it off immediately.
So, instead of paying that “holiday tax”, follow these simple tips to create a plan for your holiday spending that doesn’t include getting a second mortgage!
7 tips for a successful vacation budget
Make a list and double check it
Make a master list of gift recipients and assign a spending limit to each one. On this list, come up with a few budget gift ideas for each person, and when you run into discounts and start collecting gifts, write down the gift purchased and the actual amount you ended up spending. For example:
| Name | Budget | Valid | Gift Ideas | Gift bought |
|---|---|---|---|---|
| Tammy | $50 | Polly Pocket, Barbie, Play-Doh | ||
| Tommy | $50 | $45 | Nerf gun, basketball, Game Boy | Nerf gun |
| Tina | $40 | Roller skates, helmet | ||
| Tyler | $40 | pokemon cards, pokemon games | ||
| Trisha | 100 dollars | $99 | Hat, shirt, pants | Hat |
This gives you a realistic idea of how much you need to budget for gifts and helps you keep track of everyone you’ve purchased for. Check on each person on the list until you’re done shopping, then pour yourself a mug of hot cocoa for a job well done!
Read more: How to budget
Make several of the same dishes
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If you’re like me, you might be joining more than one holiday party this season. Most of these parties are lunch-style, which means you’ll need to bring a dish to join in.
Set aside funds to prepare your favorite holiday treat for every holiday dinner you participate in (including Christmas), and bring the same dish to every meeting. This way you can buy everything in bulk and cook the dish once, saving time and money.
Read more: 23 ways to save on groceries
turn on the light
Lighting up your home like Clark Griswold might seem like a fun idea, but moderate your holiday spending by setting a reasonable limit on your decorations. Shop around for dollar deals, buy Christmas lights online, and maybe just let your neighbors buy a 15-foot inflatable Rudolph this year.
Bonus points if you can get free lighting and outdoor decorations from your neighbors or through the Facebook Marketplace. Many people are willing to part with their decor for free or cheap, and you can get a few good deals without going broke.
Read more: 7 Secrets to Finding Great Deals on Facebook Marketplace
Ride, don’t fly
While not everyone can drive to a holiday destination, those who can will save a lot of money by avoiding expensive holiday flights.
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Prices for domestic holiday flights are at a 5-year high, averaging about $463 per ticket, Hopper said. If you have a large family (say two adults and four children like me), this can get very expensive and very fast.
But as gas prices are falling from summer highs, you can save a lot by driving instead of flying. And you can avoid all the stressful travellers, flight delays and airport craziness. A win-win!
Use coupon app
Most of us shop online these days, but you can save even more money by using a digital coupon app. Apps like Honey, Rakuten or Capital One Shopping can be installed directly in your web browser and will show you all available coupon codes at checkout.
This can save you tons of money when you shop online and you can even get your money back at the same time. If you’re not using a computer, each of these apps has a mobile app through which you can shop to apply discounts and cashback offers.
Read more: 11 Best Websites to Find Coupons and Deals Online
Increase credit card rewards
Credit card rewards can help take the hassle out of shopping around the holidays. Here are some ways to maximize your points and rewards:
Pay with points. Some retailers allow you to pay with credit card points at checkout. For example, you can pay with American Express Membership Rewards at checkout on Amazon. This will help you keep more money in your wallet and take advantage of the unused points accumulated over the year.
Buy gift cards. While it’s good to pay with points, buying gift cards can get you an even better deal. Some credit card rewards programs (such as Chase Ultimate Rewards) allow you to purchase gift cards with points. Sometimes there are also deals that allow you to use fewer points to buy higher value gift cards.
Get more rewards. Some credit cards offer high rewards and cashback rates in the holiday spending categories. If you are throwing a big holiday party, you can earn money by buying products with one of the best cards to make money on products. Other cards like Chase Freedom FlexCMmay receive high rates at certain retailers (such as Walmart or Amazon) that change every few months.
Note: If you’re going to use your credit card for the holidays, make sure you already have a plan in place to pay off the balance in full. Otherwise, the extra rewards you earn will be negligible compared to the interest payments.
Read more: Best bonus credit cards of 2022
Plan for next year (starting today)
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While it may seem premature to start talking about the next holiday season, planning right now is actually one of the most effective budgeting hacks.
Vacations can be expensive, especially if you’re traveling with a large family, so saving now will give you all the money you need. before holidays are coming again.
Start by creating a holiday savings account and figure out how much you want to save for next year. Break it down by the amount you can automatically transfer to that account each month.
For example, if you want to spend $2,400 next year, you can set aside $200 per month to transfer to your Holidays account. By the time December rolls around, you will have the entire amount ready to go.
As a bonus, if you find gifts during the year, you can get cash from this account to take advantage of off-season offers.
Read more: Why you should start saving for Christmas right now
How much to spend on Christmas gifts
This year, the average American will spend about $507 on Christmas gifts. But although this is what people spend on average, this does not mean that you must spend $500+ on gifts.
In fact, a good rule of thumb is to spend no more than 10% of your monthly income on Christmas gifts. This means that if you make $10,000 a month, you can set aside up to $1,000 for Christmas gifts.
Whatever amount you plan, you will need to split it among all the intended recipients of the gift. A good rule of thumb is to spend between $25 and $50 per person, but you can spend more on family members and less on friends and colleagues.
Read more: Christmas gifts under $50 for every budget
Final Thoughts
Christmas is expensive. But you don’t have to go into debt to enjoy the season.
It’s important to have a plan before you start spending and following that plan, no matter how tempting any sale might be (yes, even the BOGO sale at Macy’s).