This year’s holiday sales are expected to rise between 1% and 1.5%, according to Deloitte. Will holiday spending rise in your life? If there is ever a season of overspending, it’s the winter holidays, particularly Christmas, when gifts, travel, decorating, and family gatherings lead many people to rack up credit card debt that can be hard to pay back. This overspending springs from good intentions, but it can have lingering consequences on your finances throughout the rest of the year. In this article, we’ll explain why it’s easy to overspend during the holidays and what you can do to stay on track with your holiday budget and spending.
If you have questions, our knowledgeable employees are here to help! Call (877) 818-DNCU or contact one of our Northern New Mexico branch locations in Española, Los Alamos, White Rock and Santa Fe.
Save for the holiday season throughout the year
One of the best ways to avoid overspending is to get ready for the holidays in advance. For example, our Holiday Savings Club account helps you set aside money throughout the year via payroll deduction or automatic transfer. Earn interest on your savings and receive a lump sum distribution of your Holiday Savings balance in early November. You can then use that money for all your holiday expenses instead of paying for gifts, travel, and other things out of your regular paychecks or—worse yet, using a credit card.
Set a budget
If you’ve already saved for the holidays, your account balance becomes the budget. You can set a goal in advance to ensure you save enough to comfortably cover all holiday spending.
If you don’t have holiday savings this year, don’t give up. You can still set a budget for holiday spending and avoid going into debt. Here’s how:
- Recognize that budgeting is about choosing what to spend your money on. Yes, there are a certain amount of fixed monthly costs, such as your rent or mortgage payment and utility bills. We’re referring to the amount leftover after your bills are paid. Even if it’s not a large amount, you can still make choices.
- Figure out how much you can spend on the holidays this year. If you’re reading this in 2020, you may naturally have fewer holiday expenses due to Covid-19. Perhaps your income is lower this year, too. Start where you are and set a holiday spending budget that fits your current financial situation.
- Choose not to spend on certain things so you can spend on the holidays instead. What can you cut back on for the next few weeks so you can put that money in your holiday budget instead? For example, this could mean temporarily giving up takeout meals or delaying non-essential purchases. Instead of feeling deprived, think about the joy you’ll get from re-allocating this money to holiday experiences.
- Check your gift list twice. Many human behaviors are driven by habit, including who we buy gifts for. Give that list a second look this year to see if it can be reduced. You can always check in with family/friends you usually exchange gifts with to see if they’re interested in starting a new tradition. For example, instead of buying for a friend, make time to catch up at a coffee shop instead. Offer to provide a service instead of buying a gift. Or just agree that you’re both working with reduced budgets this year and would rather skip the gift exchange.
- Check your calendar. How many gatherings do you have scheduled for November, December, and January? Do any of those involve significant travel? Again, 2020 will probably look different in this regard. Whatever your holiday calendar looks like this year, make sure to account for any travel or party-related expenses in your budget.
Establish expectations early on
While you may be able to come to some mutual agreements on reducing or eliminating gift exchanges, not everyone will be on board. If your family is used to celebrating the holidays one way and you want to change that, it’s best to explain your reasons and the upcoming changes before the big day arrives. Managing expectations in advance will help avoid hurt feelings and disappointment. Deal with pushback by explaining your reasons and resolve to stick to your budget this year. You can even talk about how budgeting is good for everyone and will allow for more family fun in the future.
Plan gifts in advance
Choosing gifts in advance can help you stick to your budget. Whether you have a specified amount to spend on each person or not, making gift decisions before you hit the physical or online store will help you stay on track and get to the checkout faster to avoid impulse purchases.
Be aware of retail tricks
Remember when “Black Friday” was just one day? Now the “special discounts” and “flash sales” can start as early as October. The challenge is to navigate all the offers and marketing messages without overspending.
Since you’ve already selected gifts in advance, live by the motto that “it’s not a good deal if it’s not something you actually want or need.” So, don’t get caught up in the onslaught of emails and advertisements you see. Stick to your list and your budget. If something you planned to buy anyway is on sale, great!
To fend off FOMO, try using a browser extension like Honey that will notify you if an item on your list goes on sale.
Don’t fall into the convenience trap
In certain seasons of life, like when work is busy or the kids are little, the price we’re willing to pay for “convenience” increases. This is especially true during the busy holiday season. Why spend extra time driving around and shopping at crowded stores when you could be with family and friends instead?
This is why overspending can creep up on you in the form of shipping or same-day delivery costs, as well as extra spending on fast food and other time-saving services. Each individual charge may be small, but they add up in a “death by a thousand cuts” sort of way.
Track your spending
A budget isn’t just “set it and forget it.” The best budgets have a little flexibility built in so you can make adjustments as needed. Record your holiday-related purchases as you go to ensure you don’t overspend. Here are some additional tips for keeping your spending on track:
Some people find that using a cash-only system keeps them from spending more than you’ve already allocated to holiday spending. If you want to shop online, you could use a reloadable Visa card to keep your holiday spending on budget and separate from your checking account.
If you’re hosting, ask everyone to pitch in
Holiday dinners and parties can get expensive if you have to go it alone on purchasing food and drinks. To reduce your spending this year, ask your guests to bring a bottle of wine, appetizer, or dessert. This takes some of the burden off you without asking for too much from your guests.
Redeem cash rewards and points
If you have a cashback or rewards credit card, you can save them through the year to use at the holidays. Points can be redeemed for gift cards or specific items to give as gifts. Cashback can be used for your holiday spending budget.
Use debt only as a last resort
As mentioned earlier, it’s best not to go into debt at all for holiday spending. However, if you decide to use a credit card for some or all of your purchases, put the same kind of planning into it that you would with a budget. Keep track of your spending and stick to a limit that you can pay off within three months or so. Otherwise, the interest charged on your balance will make the total grow and it will get harder and harder to pay it off.
Let us help you reach your holiday spending goals!
Del Norte Credit Union (DNCU) is a member-owned, not-for-profit financial institution in Northern New Mexico committed to providing unparalleled, sound and unbiased financial advice. Our knowledgeable employees can help you choose the right share account for your holiday savings goals. Learn more about our share (savings) account options and open a new account today! You can also call us at 877-818-DNCU to speak with a Service Advisor.