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How To Create A Holiday Budget and Stick To It -- Part 1

The silver bells of the holiday season can certainly take their toll on your wallet. Americans predict they will spend an average  of $805 on Christmas gifts this year.   And the spending doesn’t stop with gifts. The holidays come with a host of other expenses, including food, entertaining, decorations, holiday travel, cards, and charitable giving. Add it all up, and you could easily spend thousands of dollars on  holiday cheer – and start the new year with crushing credit card debt.

If you’re hoping to avoid a New Year’s Day debt hangover this year, your best strategy is to make and stick to a holiday budget. Careful planning is the key to enjoying your holiday revelry without waking up to a cold, gray, overdrawn morning in January.

Creating a Holiday Budget

The process of making a holiday budget is much the same as creating a household budget. Figure out how much you have to spend, then work out how to divide up that money among all the things you want to buy. If the amount you have and the amount you expect to spend don’t match up, keep fiddling with the numbers until they do. You can do this on paper or a spreadsheet or with a budgeting app.

 Step 1: Set a Spending Limit

The first step in setting up your holiday budget is to figure out how much you can afford to spend in total. Ideally, this amount should come entirely out of your available cash and savings.

First, look at all the money you’ve already set aside for holiday expenses, such as a WKFCU Christmas Club Account or even just saving change in a jar.  You could already have a comfortable nest egg built up.

If you don’t have any dedicated holiday savings, consider what other sources of money you have to draw on. Include things like your year-end bonus from your job or money in your savings account. Also, think about how much money you can squeeze out of  the household budget after paying all regular expenses.

Add it all up, and the total is the amount you have to spend.  Now, your challenge is to fit all your spending within that limit.

Step 2: List Expenses

Once you know how much you have to spend, the next step is to figure out what you need to spend it on. Write out a list of everything you’re likely to buy, including:

Gifts. List all the people you plan to give presents. In addition to large gifts for friends and family, include all the small gifts you need to buy for social events, such as host and hostess gifts or a Secret Santa gift exchange or stocking stuffers. Even make room for a couple of extra all-purpose gifts.

Wrapping Paper and Trimming. Presumably, you’ll be wrapping most of your gifts before handing them over, so budget for gift wrap and trimming like ribbon and bows. Use creative ideas for gift wrapping like magazine pages, old maps, or reusable gift bags to keep cost down.

Cards and Postage. If you send out holiday cards, photos, letters, or calendars, include the cost of either buying or printing them, as well as postage.  Include shipping costs for  gifts that have to  be mailed.

Food. This category includes food and drinks for your family dinner, any holiday parties you’re throwing, and your contribution to any potlucks you plan to attend. If you’re giving people cookies or other holiday treats, add them to this category as well.

Decorations. Add a line for any holiday decorations you plan to buy, such as a Christmas tree, outdoor and indoor lights you need to replace, and Hanukkah or Kwanzaa candles.

Clothing. In most cases, you can dress for a holiday party in clothes you already own. However, if you need anything special you don’t have, that’s another item to add to your list.

Travel Expenses. If you’re going somewhere for the holidays, travel costs are another expense to budget for. If you’re driving, include gas and tolls. If you’re flying, include the cost of tickets, baggage fees, and parking at the airport or taking a shuttle. And if you have pets, include boarding them or hiring a pet sitter.

Holiday Activities. Many holiday activities, such as going to church or watching holiday movies on TV, don’t cost anything. However, some holiday traditions come with a price tag – such as photos with Santa, sleigh rides, or Chinese food and a movie on Christmas Day – and need a spot in your budget.

Charitable Giving. For many people, the holidays are a time to give money to worthy causes. Of course, you can give to charity anytime, and if you do, you probably already account for this expense in your household budget. But if it’s part of the holidays for you, it also needs to be part of your holiday budget.

After you’ve made your list, check it twice to make sure there are no expenses you’ve overlooked. If possible, add a line to your budget marked “other” to cover any unexpected costs that pop up during the holiday season.

Step 3: Set Priorities

Don’t panic if your list of holiday expenses seems a little long. If there’s no way you can afford to cover every single item with the amount you have to work with, that just means you need to set some priorities.

Go through your list and number the items based on how important they are to you. Assign the number “1” to your top priority, number “2” to the next-highest priority, and so on. Then reorganize your list to put the highest-priority items at the top. These items should be the first ones you fund when you start divvying up your holiday budget.

WKFCU Christmas Club Account

A WKFCU Christmas Club account is a great way to have the funds you need for all your holiday plans.

  1.  Open a special Christmas Club Account
  2. Set up payroll deduction to automatically deposit funds into the account each pay period. You select the amount.
  3. On the first business day in October, your funds will be transferred into your Share/Savings account
  4. Your Christmas Club Account automatically begins again for the next Christmas. You may change the   amount you put into your account at any time.
  5. You earn dividends on the amount that is transferred into your Share/Savings Account on Oct. 1.
  6. There is a $10 fee for each early withdrawal before Oct. 1.

 

Open your account today!

Next week, we will learn about allotting funds to the items on your expense list and keeping track of your spending to help you stay on budget.

(Partially reprinted from moneycrashers.com)

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