The holidays are right around the corner and it’s usually a fun time for people to travel, visit family, host parties, attend holiday-themed events, and score some great deals on gifts and other goods. But, the holidays are also often associated with spending lots of money.
While it’s perfectly fine to opt out of the commercialized pressures to spend during the holidays and take a frugal approach, you’ll still most likely have to spend some money here and there. It’s best to be realistic about your holiday spending budget and prepare your finances so you won’t have to bring in the new year with a drained bank account.
Here are 5 definite ways to prepare your finances for the holidays so you have less stress, debt, and post-holiday guilt, and more freedom to do what you want with your money.
1. Start Saving Now
This is an obvious way to prepare your finances for the holidays. But if you want to have enough money to enjoy your favorite holiday traditions, you need to start saving up ASAP. I spent quite a bit on Christmas in previous years, but I still felt like the total amount spent was controlled and within budget.
Instead of trying to slash my Christmas budget this year and pinch pennies, I decided to start saving up early so I could afford to attend some fun events and get a few gifts for my loved ones. I used to start saving in July, but now, I start saving in January. I deposit money into my Capital One 360 targeted savings account for Christmas and I love watching the amount grow.
My goal is to save about $1,000 by December and I’ve already surpassed that. To come up with your targeted savings goal for Christmas or the holiday season, it’s important to determine the following:
- Your holiday spending categories and a list of estimated expenses
- What types of activities or events you’d like to attend with family and friends
- What types of coupons or discounts you can get on your favorite events
- How many people you plan to buy gifts for at Christmas
- Do you have extra money you have to set aside? Or, how you can earn extra money or reward points to cash in for holiday expenses
- How frequently you want to save
- Any charitable giving you plan on contributing
Related: Take the Debt-Free Christmas Challenge
2. Examine Your Spending
It’s a while since we’ve all established New Year’s resolutions and financial goals for the year. Right before the holidays is the best time to comb through your budget and make some adjustments. Determine if you need to refinance any debt or loans, shop around for better insurance rates or trim some spending categories.
You should also read through your bank and credit card statements in detail. It turns out that recently my bank tried to come up with some new charges and fees sneakily. While the fees are avoidable, I wouldn’t have known about them if I didn’t open my statements each month and skim through all the details.
If you feel like your spending has gotten way out of control, you can even reset your spending habits by having a no-spend week or weekend to tone down your purchases as needed.
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3. Plan Your Traveling Early
If you plan on traveling or visiting family during the holidays, try to book your trips early and fly out on an off-peak day if you will be traveling via plane. Don’t forget to look up the airline’s rules for social distancing and being safe and healthy on the plane and in the airport.
Also, make travel arrangements at a hotel or with friends and family in advance because the sooner you organize your trip, the more options you’ll have. Airbnbs are a great option for traveling with family since you can rent an entire home and have full access to a kitchen to save money on meals.
You can also shop around for deals and compare rates for travel on sites like Priceline.com. For those who are traveling, you might find it better to cut back on other traditional holiday expenses and prioritize your trip and the overall experience with your family.
4. Get Your Credit Card Balances Down to $0
If you aren’t using credit cards currently, then you shouldn’t have to worry about anything during the holiday season. But if you plan on leveraging your holiday spending to rack up credit card points that you can redeem for travel, cash, or other rewards, you should try to pay off any small balances you have ahead of time.
No one wants to get into major credit card debt after Christmas due to overspending. Thus, my strategy is to get all your balances down to $0 or as close as you can. Then, make purchases in moderation, but pay the balance off almost immediately with the holiday money you have saved up. This way, you enjoy the benefits of accumulating more reward points and/or cashback without having to take on unwanted credit card debt.
Related: I Raised My Credit Score By 150 Points, Here’s How
5. Establish an Extra Stream of Income
If there was ever a time to establish a new side hustle and boost your income, this time of year is the best time. Holiday expenses can seem daunting, especially when you’re on a budget and don’t have much extra to set aside for savings.
Luckily, plenty of seasonal jobs will be advertised very soon and you can always establish a new side gig in your spare time or from the comfort of your own home. If you have a talent or hobby that you think could help you earn a solid income, pitch friends, family, and business owners about working together and put all the extra income you earn into your holiday savings account.
Here are a few ideas to get you started:
How To Prepare Your Finances For The Holidays
Well, there you have it – the five different ways that you can prepare your finances for the holidays. We are in a special time right now, with many people trying to make ends meet for whatever reason necessary.
If you have to skip this year or keep it simple for the holidays, just remember that that’s OKAY. As long as you are safe, warm, and fed, that’s really all that matters!
Have you started to determine what your budget will look like for holiday expenses? How have you started preparing your finances for this expensive season?
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