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I’m a Financial Expert: Here’s How I Approach Holiday Budgeting

Anna Ostanina / Getty Images/iStockphoto
Anna Ostanina / Getty Images/iStockphoto

The holiday season can be filled with joyful memories as you come together with friends and family. The holiday season can also come with credit card debt and financial stress if you don’t plan accordingly.

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This is why we reached out to a financial expert for some financial advice on holiday spending so that you don’t have to worry about paying that credit card bill in January. In this article, Jessica Morgan, a financial expert and founder of Canadian Budget, shares her approach to holiday budgeting.

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Establish a Holiday Savings Fund in Advance

“Crafting a savvy holiday budget begins by establishing a Christmas savings fund, ideally starting on January 1st,” Morgan stated. “Calculate the total spend by multiplying the number of people on your list by your per-person gift budget, then divide by 12 for a manageable monthly savings goal.” If you start planning and setting money aside in advance, you won’t have to worry about using your credit card or finding space for everyone’s gift as the date gets closer.

Why does this strategy work? “This proactive approach alleviates the strain of relying solely on end-of-year paychecks,” Morgan stated.

It’s essential to remember that your paychecks in December will still have to cover your other expenses that you can’t avoid. The goal is to build up your holiday savings fund throughout the year so you’re not surprised when Christmas rolls around and you suddenly have to spend hundreds or thousands on gifts.

Create a Realistic Holiday Season Budget

“To make a solid holiday budget, list essential monthly expenses — rent/mortgage, utilities, insurance, transportation, groceries, and debt repayments,” Morgan said. “Allocate the remaining funds for variable expenses, savings, investments, and holiday shopping.”

You don’t want to neglect your other financial priorities just because it’s December. The holidays will come and go, but your retirement or other financial goals will still loom.

“Flexibility is key — consider adjustments between spending categories or spending pauses in certain areas to meet short-term financial goals. Don’t overlook non-gift holiday expenses like food, travel, or social activities — integrate these costs into your budget to avoid last-minute financial strains.”

The holiday season comes with increased expenses, but this doesn’t mean you should forget about other financial obligations. That’s why it’s essential to keep your holiday budget realistic. You won’t only be spending money on gifts, but also an increase on food and social activities. You will likely attend more events where you have to factor in expenses like dining out and transportation. You want to ensure that you have a buffer for whatever the holiday season may throw at you.

Plan for Unexpected Purchases

Are you late to the Christmas saving game? Morgan shared this: “Prioritize your December and January budgets to avoid unexpected holiday expenses and potential New Year’s credit card debt. Budgeting in advance of the holidays can help avoid buy-now, pay-later, and charging items on credit that are out of budget.”

The reality is that no matter how meticulous your budget is, there will still be unexpected expenses that pop up during the holidays. Leave some extra space in your budget for these last-minute purchases.

Figure Out Your Gift-Giving Approach

“When deciding on a gift-giving approach with family and friends, it’s critical that you set gift spending limits,” Morgan said.

This might feel like an uncomfortable conversation, but you’ll want to figure out the gift-giving approach in your family so that you don’t overspend and that nobody feels uncomfortable.

A few other suggestions on top of setting spending limits include:

  • Opt for joint gifts for couples instead of getting everyone an individual gift.

  • Try out some sort of “Secret Santa” idea where you only have to purchase gifts for one person in your family instead of everyone.

  • Focus solely on children’s gifts — not the adults. If someone has children, you can ask if it’s acceptable that you focus on their gifts only.

Be Strategic With Your Holiday Shopping

How can someone save the most money on holiday shopping in general? Here’s what Morgan does: “Maximizing savings during holiday shopping involves strategic planning and smart shopping techniques. Spread out Christmas shopping across the year, taking advantage of sales like Black Friday and Boxing Day to prep for the following year’s festivities.”

If you have a holiday savings fund and budget, you can improve your shopping by looking for deals throughout the year.

Create a Shopping List Before Heading Out

“Enter shopping trips armed with a list and a set spending plan to curb impulse purchases, staying on track with your budget,” said Morgan.

Find Unique Options for Gift Giving

What if you’re stuck on finding the budget for everyone on your list? Morgan recommends that you re-gift something you already have. There’s a strong chance that your closet is still filled with gifts you received last holiday season that you’re not using. You never know what item will find a better home with someone else.

Morgan shared two other unique options for gift-giving: Shop secondhand, and leverage loyalty points for purchases rather than cash. If you’re crafty, you could also make some gifts yourself.

Use Online Shopping Tools

Morgan recommends that you leverage online shopping benefits by using browser extensions such as Honey or Camel Camel Camel to scout for deals and savings, ensuring you get the best bang for your buck.

Another tool to help with holiday budgeting is using a credit card with some rewards. The card that you use will depend on your personal preferences and goals. You could use that holiday shopping to get travel points for your next vacation in 2024.

Closing Thoughts

With some planning and consideration, you can create a holiday budget that makes shopping smoother. You don’t want to be in credit card debt and financial difficulty in January because you didn’t prepare for the holidays again. If you apply some of these tips for holiday budgeting, you’ll feel comfortable with your bank account when 2024 rolls in.

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This article originally appeared on I’m a Financial Expert: Here’s How I Approach Holiday Budgeting