The holidays are still months away, but now is a great time to take a close look at your budget and start setting aside some extra cash for those holiday purchases. According to the American Research Group, Inc., Americans spent an average of $646 on gifts for the 2011 holiday season. This doesn't include other holiday-related purchases such as food, decorations, or travel expenses, so your actual holiday expenditures could be significantly higher. Planning for those purchases over the next few months can help you enjoy the season without money worries--and prevent high credit-card debt come January.
Here are some tips on how to start saving for the holidays right now:
Set Up a New Savings Account
Separating your finances will make it much easier to visualize your goal and actually reach your savings targets before the holidays. If you have an online savings account, it's very simple to section off your account for different savings goals. If not, you can work with your personal banker to set up a separate savings account just for holiday expenses. Make sure you're choosing an account that doesn't charge high fees for carrying a low balance, and find out what the policy is for closing the account when you're done with it. If the process is too complicated, remember you can just use that account for another savings goal next year.
Make Your Gift List Now
Draft up that gift list now so you have a fair idea of how many gifts you will need to purchase this year, and approximately how much they'll cost. Be as detailed as possible with the list so that your final gift expenditures end up being close to what you projected. Consider trimming down the gift list if you don't think you can meet that savings goal by the end of the year. Preparing this list now will make it much easier to plan your holiday expenses and cut back in some areas if needed. Of course, you can always modify it over the next few weeks as you think of more people to include or exclude from the list.
Set a Weekly Goal
Estimate your total holiday expenditures this year, or review your purchases from last year and modify the total as needed. Remember that this needs to include the cost of postage and shipping fees, décor, contributions to charitable organizations, events, clothing, and catering or food costs. Divide that amount by the number of weeks left before the holiday shopping season begins so you have a fair idea of how much you will need to save each week to reach your goal. Knowing what that figure is can help to make the goal more tangible--you can cut out extra expenses throughout the week and contribute the saved amounts to your holiday savings account.
Research Travel Deals
If you're planning on traveling this holiday season--whether it's for a holiday celebration or just a leisurely getaway --start looking at flights and hotel packages to secure some of the lowest rates. Remember that flights and hotel rooms will fill up fast as the holidays approach, and limited availability usually means paying a premium. Plan ahead and take advantage of early bird specials and package deals so you can book something affordable and end up spending less over the holiday season. Consider working with a local travel agent who can help you find some great rates and deals on attractive packages over the peak holiday season. Now is a great time to start searching for and securing these deals, because many people start looking into Thanksgiving travel packages as early as October.
Take Credit Cards Out of the Picture
How many holiday seasons have gone by when you've had to use your credit cards to pay for certain purchases because they ended up being a "holiday emergency"? Don't make the same mistake again this year by taking credit cards out of the picture. Don't even consider your available balance for those extra holiday purchases, because you will end up paying interest on anything you carry forward into next year. Focus instead on shopping on a "cash only" basis this holiday season--if you can't afford to buy those items with cash, they don't belong on your holiday gift and purchase list.
Sabah Karimi is a regular contributor to deals blog WiseBread. For more great deals and shopping advice, check out Wise Bread's daily deals newsletter.
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