Kendall here with another Am I Doing This Right?! post tackling a highly requested topic — holiday budgeting and how to navigate the upcoming season of spending! If you’re anything like me, your approach to holiday budgeting consists of avoiding logging into your bank app while reluctantly swiping your credit card for holiday bar tabs, all the gifts, air fare, more gifts, hostess expenses, and even more last-minute gifts, all while hoping everything will magically work out in the New Year! ??
While the holiday season is such a fun time, the expenses that go along with it can add up fast, which is why we turned to a personal finance expert to learn how we can stick to a budget and still attend all of the holiday events and give great gifts!
Meet Maureen — she’s a Chicago-based financial advisor at Huber Financial Advisors with a specialty in working with young families and professionals to define financial goals and implement strategies to achieve them. She is passionate about educating and sharing personal finance and planning strategies, which she does through her blog The Financial Fashion Planner — where she combines fashion and finance to help her followers build a net worth and wardrobe they can be proud of.
We’re sharing ways to track spending, save time and money, and even make money throughout the holiday season! Let’s get into it:
Savvy Ways to Navigate Holiday Spending
Remember You Don’t Need Anything
First thing’s first — remember you don’t need anything to enjoy the holidays! If you get invited to a last-minute party, you don’t need a new outfit to attend it. If your sister always gives you extravagant gifts, you don’t have to dollar-match her generosity! There are plenty of ways to gift gifts and spend quality time with friends and family without draining your bank account.
In fact, attending what you can (or want to!), giving thoughtful gifts or experiences, and spending quality, focused time with people is a much better gift than being stressed and not present. I would much rather have a long coffee date with a friend as our gift to each other than have her stress over what to give me! Give your friends and family the best of you, not what’s left of you. ? I know it sounds so simple, but I think it’s important to remember this throughout the holidays — do what you can, with what you have, from where you are!
Don’t be Afraid to Set Expectations
Speaking of unnecessary stress, let’s talk gift giving. The majority of your holiday budget questions focused on the financial strain of gifts: how much to give, who to give to, and how to match gift generosity. When you think about it, all of these stressors stem from managing expectations. The simple answer: give gifts to who you want that are within your budget, and never worry that your gift won’t be enough. I know this can be easier said than done sometimes, so here are some ideas to help you set gift expectations up front:
Suggest a Secret Santa
Perfect for offices, a niche group of friends, or an entire family, pitch a Secret Santa! This way, you can focus your efforts on one great gift, saving you time and money. And also, the secrecy is just plain fun and adds another layer of excitement!
Set a price limit
This one is great for close friends, family members, or your spouse! Just agree to set a limit! This way, no one has to wonder if they are giving enough or too much, and there is no awkwardness when you exchange gifts. Plus, finding something within the limit can be a fun challenge!
The exchange game
Another fun idea is to set up an exchange — for anything! Your book club can exchange ornaments, your office can swap funny coffee mugs, or a friend group can give a book or scarf they think the other will love. This way, expectations are clear, and you can focus on enjoying each other’s company!
Potluck or a group meal
Take out the gift giving all together and host a potluck or treat yourselves to a festive meal! Play games at home or watch holiday movies alongside the potluck, or pick a fun, festive restaurant to shake things up and celebrate your friends all at once.
Donate to a charity
Lastly, consider donating to a charity for your friends or family! Decide to donate to a charity you all support, or you can give to an organization that is close to each person’s heart.
Set a holiday budget on top of your usual monthly budget
Once you’ve set expectations, it’s time to budget! Maureen broke this down for those who plan for holiday spending and those who don’t:
For the planners:
The best way to set a holiday budget on top of your monthly budget is to incorporate the savings into your monthly budget during the year. Automatically set aside a fixed dollar amount each month and move it into a separate savings account earmarked for holiday gifts. Maureen says she is a proponent of assigning each dollar a purpose. By moving funds into an account labeled “holiday” or “gifts,” you are literally assigning its purpose. She also really likes guidelines and rules of thumb — the one she follows for holiday gifting is setting aside 1% of take home income each month for gifts. For example, if your net take home is $3,000/mo, challenge yourself to put aside $30 each month into a separate savings account, and you’ll have $360 already saved for gifts come the holiday season.
(Jess’ note: On that note, if you haven’t yet read/listened to “I Will Teach You To Be Rich” by Ramit Sethi––you need to! It is the BEST book on automating your finances to make saving easy and in a way that doesn’t feel like you’re depriving yourself! I highly suggest getting both the audiobook because Ramit is really engaging to listen to, but the book is helpful for reference!)
For those of you who are always caught off guard by the holiday season:
Another way to budget for the holidays on top of your usual budget is to make the holidays a priority in your budget during the holiday season. Maureen says this can be done by eliminating or adjusting discretionary spending categories ahead of the holiday season and reassigning those dollars toward gifts. Discretionary or non-essential categories include entertainment, dining out, clothing, hobbies, etc. By no means should you put off paying your electric bill so you have money for gifts! During the years that Maureen fell into this budgeting approach, (this makes us feel so much better that this happens to financial professionals too!) she would sacrifice her clothing budget and reassign those dollars to gifts.
Monitor Spending with Apps
There are so many great apps and tools out there to help with budgeting! A few of Maureen’s favorites include Mint, Personal Capital, and BudgetPulse. These are super robust apps that have so many capabilities in addition to tracking users’ spending habits.
Transparency and spending awareness are so important when budgeting for the holidays, which is why Maureen uses Mint to track and monitor her real-time transactions. With those transactions, she can tag them and sort them into different categories like food, entertainment, clothing, and gifts. The user has the ability to assign a monthly budget cap for each category and as you spend, the app tracks your spending in each category throughout the month. Mint also has a notification system and will alert you if you get close to overspending your budget. Spending apps are a great way to keep track of your holiday budget, especially when you’re not doing all of your shopping at once.
Find Ways to Save
With so many competing agendas, it can be really hard to stay on budget, let alone save during the holiday season! You should never put yourself in a situation where you are sacrificing long-term savings for Christmas gifts. Maureen recommends building a holiday budget that allows room for your other savings goals. When she works with clients, she encourages them to define their financial goals and commit to an automated savings plan that allows them to reach that goal.
Once you have an automated savings plan in place, she says it becomes very easy to save during any high-spend season, because you’ve already learned how to spend within what’s leftover after the automatic savings. She likens this strategy to a tube of toothpaste. When the tube of toothpaste is on its final days, you somehow manage to stretch the remaining amount of toothpaste out for days! Treat your checking account the same way, learn to work with what’s leftover after automated savings.
Stock up on Go-To Hostess and Last Minute Gifts
Last minute invites and gifts inevitably pop up, which can break your budget if you’re not prepared. Maureen recommends stocking up on a particular bottle of wine or go-to candle that you like to give as hostess gifts. Stock up when items you know you will use are on sale. (Black Friday and Cyber Monday are great days to build up your supply of hostess and last minute gifts!
Another way to save is keeping extra gift bags and tissue paper on hand to wrap these items. Maureen says that with some pre-planning, you can get these items at HomeGoods or the Dollar Store and come out dollars ahead compared to the last minute pick-up at the corner store.
Don’t Forget Holiday Tipping Etiquette
Never know how much to tip your doorman, nanny, housekeeper, or dog walker during the holidays? Make sure to file this information for when you’re creating your holiday budget! Maureen follows these tipping rules: For services like a dog walker, fitness instructor, housekeeper, babysitter, etc., tip them the equivalent of one-session. For services like your hair stylist, manicurists and the like, the rule of thumb is tipping at twice your normal rate. If you are normally a 20% tipper, be prepared to tip up to 40%.
As for doorman/front desk workers, most buildings will have a holiday fund and will send notice to residents asking for contributions. This amount is typically between $50-$100 and the contributions are anonymous. If you live in a building with a door staff, Maureen says little acts of kindness, like delivering coffee or a meal from the place next store will make their season merry and bright!
Use Credit Cards to Your Advantage
Before we get into credit cards, Maureen has a financial PSA: ? You should never use a credit card for holiday purchases if you don’t have the ability to pay it off in full at the end of the billing cycle. Credit should be treated the same as cash. If you don’t have it, don’t spend it!
If you can pay off holiday spending, putting holiday gifts on your credit card is a great way to ramp up your credit card benefits. To make the most of holiday spending and bonus points, it’s important to first identify what you value in credit card rewards.
When it comes to credit card rewards, there are two options: travel points/miles or cash-back. If you find greater value in accumulating travel rewards with your everyday purchases, Maureen recommends finding a highly-rated credit card with no annual fee and competitive travel bonuses. If you prefer cash-back, look to use a credit card with no annual fee and a competitive cash back feature. Did she mention you want a card with no annual fee!? ? To find the best card for your wants and needs, she recommends checking out nerdwallet.com.
Tap into Cash Back Rewards
If you have a card with a cash back feature, check to see how many points you can exchange for cash. This can be a great pot of money to allocate toward holiday expenses! Similarly, cash back rewards are a great way to get a head start on saving for the holidays next year. Use the rewards you earn throughout the year to set a budget for gifts and challenge yourself to spend within your cash rewards. Depending on the type of card, the cash back could be equal to 2-5% of every purchase made throughout the year, which can translate into a lot of $$$.
Consider a seasonal side gig
Lastly, you can offset gift costs by making some extra cash! This can be anything! Think about what you’re good at and offer those services! Here are some ideas:
Check out retail
Almost every retail store needs extra help around the holidays, and many don’t require past retail experience for seasonal employees. Pick up some evening and weekend shifts to make some extra cash.
Babysitting, dogsitting, housesitting
Freelance your services
Does your day job lend itself to freelancing? Let your network know you’re open to opportunities!
Sell your clothes