With the proliferation of online shopping, it's now easier than ever to overdo it with your holiday shopping — and potentially break your carefully planned budget. So, if you want to be more proactive about managing your finances this season, you may want to explore setting a holiday spending plan.
The good news is it's easier than you may think. All it takes is a little bit of pre-planning. Here are some holiday finance considerations to help you stay in control of your spending this year and the seasons to come.
It's the Most Expensive Time of the Year
If you feel like your holiday shopping list always puts a big dent in your wallet compared with other times of the year, you're not alone. Not surprisingly, many Americans spend more than usual during the holidays compared with other times of the year.
A study from Deloitte on 2021 holiday retail trends estimates that the average American will spend approximately $1,463 this holiday season. That's up slightly from 2020 and in line with average spending in 2019. The same Deloitte study found this year, same as last year, the majority of dollars spent will be online compared with in-store.
It shouldn't come as a big surprise that most of this uptick in spending will likely come from higher-income households. However, that doesn't mean that those with limited budgets aren't planning on shopping either.
6 Holiday Spending Considerations
As you gear up to get your holiday shopping underway, it can help to keep a few budgeting strategies in mind. They may help you make the most of your money during a busy holiday season. Here are six considerations to help keep your holiday spending from snowballing.
1. Set Spending Limits
There's a reason why much of the advice around personal finance starts with setting a budget. Determining what you can afford to spend before you begin shopping is one of the easiest ways to help you stay on track.
There are a few approaches you could take here, such as setting an overall spending limit or setting limits per gift. Whichever method you choose can help you keep your budget in the back of your mind as you shop.
2. Try Shopping Earlier
According to McKinsey, nearly half of consumers start holiday shopping in October. You might be one of them. There are a few reasons why people continue to shop earlier in the holiday season.
The first reason is simply for convenience. You may be thrilled to have all your shopping out of the way early, so you don't need to worry about it anymore (and can avoid the crowds of shoppers). And second, starting before the official holiday season kicks off gives you ample time to look for savings and deals you might not otherwise find in November and December.
3. Start Preparing Year-Round
If you're on a fixed income and it's a struggle to spend a big chunk of money all at once, you may want to think about saving year-round. This way, the money you set aside for gifts won't take away from what you need to pay the bills or add to your retirement savings.
Some people find it helpful to work on building their holiday funds throughout the year. Setting aside a little bit each month (or week) into a savings account earmarked for holiday spending can go a long way toward taking off some of the pressure of finding money to pay for gifts when the time comes.
4. Work on Setting Your Priorities
It's easy for your holiday shopping list to feel like it's a mile long, even when you only have a few family members and friends to shop for. Accordingly, it's reasonable that you may not afford everything for everyone on your shopping list — and that's OK.
To help with decision-making, try going through your list and setting priorities. Then, consider allocating the majority of your budget to those top priorities. Afterward, if you have funds left over, you can decide if you want to tackle the lower priorities on the list.
5. Consider Tracking as You Go
It's easy to buy now and tell yourself you'll worry about the costs later. But that could lead to a big shock come January when your credit card debt is suddenly much bigger than you expected.
Another useful holiday finance tip to manage spending during the season is to keep track of every purchase you make. You may want to create a spreadsheet, write down your totals or use an app to list what you spend and subtract it from your budget. This can help you stay on track and within budget throughout all the festivities.
6. Explore Your Creativity
Showing your love and care for another doesn't have to mean material things and expensive gifts. After all, there's a reason why "it's the thought that counts" is a popular saying around the holiday season.
If you have some free time and a skill or hobby you love, such as baking or crafting, you may be able to create memorable gifts that don't cost much. You might also just find that your friends and family would love a personalized gift from the heart over something store-bought. Give some thought to other ways you can explore your creativity and share the joy of the holiday season without having to shell out big bucks.
For many, shopping during the holidays is a stressful time. If you can relate, you may be able to help yourself down the road by taking some of these seasonal shopping strategies into consideration. That way, you can focus on enjoying spending time with your loved ones instead of worrying about your budget.