It’s July, so why on earth am I thinking about Christmas you might ask? According to Magnify Money, 74% of Americans racked up $1,000 or more in holiday debt. The number one reason for the debt is that people did not plan their holiday budgets properly. So why am I talking about Christmas in July? Because now is the time to start planning if you are the kind of person who likes to buy lots of gifts for Christmas. If this sounds like you, you will want to stick around for several tips to help you save money this Christmas.
Before I get into the money saving tips, I want to talk a bit more about the importance of planning ahead. Further on the topic of accumulating holiday debt. In the statistics given by Magnify Money, 29% of the respondents said that they need 5 months or more to pay off the debt they accumulated for the holidays. Think about your interest rate for your credit card, and how much you would end up spending over time due to only making the minimum payment. Does it really sound like a good idea to get into debt for the holidays?
Now that we have an understanding of the importance of planning your holiday budget, we can get more into some Christmas shopping tips.
Step One – Figure how much Christmas costs you
To figure out your Christmas budget, take a look back at what you have spent for Christmas gifts in the past years. You can do this by reviewing credit card statements and receipts.
To get an accurate picture of your spending, you want to include gifts, food, and any other holiday entertainment related expenses you may have accumulated. This includes the drinks after the work holiday party, the champagne you purchased before heading to a holiday get together at a friend’s house, and the gift card you purchased for the holiday Secret Santa gift exchange at work.
You need to have a clear picture of what your holiday spending really is, so that you can budget accordingly this year.
Step Two – Make your holiday shopping list
I’m sure you are thinking it’s only July, and it is too soon to think about this, but remember, the key to success for anything is planning.
Using the expenses you figured out in step one above, think about who you typically purchase holiday gifts for. What kinds of gifts do you usually purchase? Do you plan to buy that person a gift again this year?
Figure out what you would like to give each person on your list and set a dollar amount based on what each thing costs. This number is your budget. Think of it as a hard number that you cannot go over no matter what.
I’ll talk later about how to ensure you do not exceed this number.
Step Three – Figure out how much money you have for the holidays
Think about this from the perspective of how much cash do you have? I only recommend using credit cards if you can stick to the amount we figured out in step two. While there are benefits to using your credit cards during the holidays such as cash back, and miles, make sure you only spend what you can pay back before the end of your billing cycle.
If having a credit card with a high limit, and sticking to a certain amount sounds tempting, leave the card at home, and plan to use cash. You cannot spend what you do not have.
To figure out how much money you have to spend for the holidays, think about your overall monthly expenses. The things that you must pay for no matter what. Figure out how much money you have left over after contributing to savings, retirement, and paying bills. Looking at that dollar amount, how much can you afford to put aside each month for your holiday shopping?
Once you have figured out this number, set up an auto draft so that each pay period your agreed to amount is pulled from your checking account, and placed into your savings account.
Bonus: Some banks give you a cash back bonus when you open a new account and maintain a certain amount of money in it. This could be a good way to give your holiday savings a small boost.
When figuring out this number, be realistic. The holidays tend to make people go a bit overboard. I am not sure if it is the spirit of Christmas or the fact that everywhere you turn, something is on “sale,” but it is for this reason, that I suggest starting to think about your Christmas spending now while it seems far away, and your head is clear.
Step Four – Tips to save money this Christmas
Giving gifts is great, but it is smart to think about ways you can cut costs for the holidays as well. If you can find ways to cut costs related to your holiday spending, you might be able to put aside the extra cash for a rainy day.
Christmas shopping tips to consider
Some people love Christmas, and everything related to the holiday. This can equate to them buying things just for the sake of buying them. For example, we all know that every store strategically places holiday-related items to catch our eyes and make us buy them. Avoid falling into the trap of buying things just because they look pretty. Take a moment and check yourself, by considering whether or not the item is a need or a want. Remeber when you were a kid and grabbed stuff in the store that you knew your parents were not going to purchase for you? Think of that, and put it back.
Do not try to keep up with or compete with others
Do you spend money just to keep up with or compete with your neighbors or friends? We have all seen those holiday movies where neighbor 1 decorates their home and neighbor 2 tries to go bigger and flashier. Do not be neighbor 2, unless you are super rich and have the extra money to spend. If so, go for it, but for those of us who have to plan and spend wisely; do not compete or try to keep up with others.
Stay away from obligatory gifts
Do you participate in gift giving that feels obligatory? If you have kids, are you buying gifts for their friends and their friends parents? Think about how quickly doing this could run up your holiday tab. Is there a way to DIY your gifts? Maybe something baked, or a craft that you are good at.
Buying things that are not necessary
Do you send holiday cards to everyone, including people you have not talked to all year? If so, stop doing that. You are spending money on cards and postage that could be used for other expenses.
Save on holiday travel by planning ahead
Traveling for the holidays? Use apps like Hipmunk to map out your trip and get fare alerts each time the cost of your flight goes down. I have found some really great travel deals through using this app that has saved me tons of money when compared to booking travel without research.
Take advantage of Black Friday and Cyber Monday
Black Friday and Cyber Monday sales. Practically everything is marked down super low for Black Friday, and Cyber Monday. If you are brave enough, try to hit those sales to get your Christmas and holiday gifts while costs are at their lowest.
Step Five – Make Extra Money
If you have looked at your budget and realized that you will still be short on cash. Look for ways to make extra money.
Take a look at your closet, and around your house. Are there things in excellent condition that could be sold? Take advantage of the fact that it is still summer and have a garage sale.
Try driving for Uber or Lyft to make extra cash. People are out and about enjoying the weather, and they need a ride to get where they are going.
Are you crafty and good at making things? Consider opening an Etsy shop to sell your products.
Have travel plans? Consider renting out your home through Air B n B while you are away.
Step Six – Plan Ahead
Out of all of the steps listed, this is the most important step. Planning ahead will ensure that you never accumulate holiday debt again. How great is that?
Now that you have read steps 1 – 5 you know how to create a Christmas budget. To make this even more effective for next year, plan to start saving in January.
You can do this by creating a holiday fund at the beginning of the year. By using the number you figured out in Step 3, continue to have this amount automatically deducted from your checking account each pay period, and set aside to your savings account.
By putting your savings on auto-pilot, you enable yourself to save without thinking about it. Just be sure to leave your money in your savings account and avoid dipping into it throughout the year. This is a great way to avoid getting into debt for the holidays.
What are some money saving tips you use to keep your holiday expenses low? Tell me in the comments below, and do not forget to pin this for later. It is only July, but you will want to reference it as the holiday’s approach!
Not big on the holidays, but love saving money? Check out my money saving tips and learn more about things to cut from your budget to save more money.
