Giving gifts is one of the greatest joys of the holiday season, but all of that shopping can leave you scratching your head when you add up the cost of buying gifts for family and friends. That’s why we asked Trey Trapp, financial advisor with Edward Jones, to share his advice for creating a holiday shopping budget to help you stay on track financially while you seek out the perfect gifts for your loved ones.
The first step to any successful budget is to spend some quality time preparing it by putting pen to paper. Studies show you are 42 percent more likely to achieve your financial goals if you write them down. This process forces you to strategize an action plan and allows you to revisit the plan to track and chart your progress. But a budget alone is not the end. Set up times to review this budget periodically to make sure you are still on schedule.
To begin, you need to take a look at your current finances and figure out a budget that will not jeopardize your ability to meet your normal monthly expenses. Estimate the amount of income you are expecting during this time period, and then factor in your fixed monthly costs including mortgage/rent, insurance, utilities, groceries, etc. You don’t want to put yourself in a bind financially because of overspending during the holidays. The holidays are stressful enough. Don’t add to the stress by creating unnecessary financial woes.
Create a list of all the people for whom you wish to purchase gifts — family, friends, co-workers, and anyone else. Then attach a dollar amount for each, and stick to that dollar amount. Knowing your spending goals long beforehand will help you stay on track as the holiday season progresses. When a gift item is identified, check multiple sources for the best deal. Comparison shopping locally for the best price is a great way to save money. If you look online, be sure to take into account shipping costs and gift wrapping charges. Once you have purchased a gift for a person, cross that name off the list. This will help you to avoid any last-minute impulse buys. Save your receipts so that you can compare the amount you spent with each budgeted entry.
Plan ahead when holiday shopping. Buy a few gifts at a time instead of waiting to buy them all at once or at the last minute. It is far easier to spend small amounts spread out over several different times than it is to budget for a larger lump-sum purchase for all gifts at once. Planning ahead will also potentially allow you to take advantage of “Black Friday” deals.
Another tip to help control and curb any unnecessary spending is to pay with cash whenever possible. Leave your credit and debit cards at home when holiday shopping. This mentally forces you to stick to your budget because you only have a certain amount of cash on hand. If you do use a credit card for holiday purchases, pay off the amount in full when your bill comes in to avoid credit card finance charges.
The same rules apply for any expected travel over the holidays. Plan ahead. Research. Look online. Comparison shopping has never been easier than it is right now because there are so many websites that offer potential discounts on travel and lodging. Factor in costs associated with your travel as well— checked baggage fees, gas, etc.
One additional tip for next year, start saving early. For instance, set aside $50 per month and you will have $600 when the holiday season arrives. Last but not least, enjoy the holiday season.