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How to set a budget for holiday spending

Once you add up gifts, travel and food, the holidays can get really expensive. It’s hard not to overspend, in fact, most Americans plan to spend two weeks’ worth of their earnings.

According to a study from GoBankingRates, nearly 57% of Americans say that they plan to spend a full paycheck on Thanksgiving and Christmas in 2017. Seeing as the average annual wage in the U.S. is $49,630 (according to the U.S. Bureau of Labor Statistics), the average bi-monthly paycheck is about $1,908.

While a whole paycheck is a lot, a whopping 22% say that they plan to spend two paychecks, or an entire month’s pay on holiday festivities.

It’s easy to get caught up in the holiday cheer, but the last thing you want to do is overspend in December, and start the New Year in debt. Here are a few things to remember as we head into the busy shopping season.

Set a holiday budget

Before you commit to spending an entire paycheck, take time to crunch the numbers and analyze how much you actually need to spend. Write down every expense you may incur, including travel, decorations, Christmas parties and gifts. Identify the amount of money you can spend overall, and then divvy it up among those categories. If the money allocated doesn’t cover everything, you may need to prioritize things or cut back.

Choose happiness

Money is a sensitive topic, and during the holidays, emotions are even more heightened. “People would rather act like martyrs and go into debt rather than talk about their financial situation,” said Mary Beth Storjohann, CFP and Founder of Workable Wealth.

As you set a budget, try to prioritize activities that bring happiness. If money is tight, you don’t have to do everything. For instance, should you spend money on a plane ticket and not buy gifts? Or should you send gifts to family, and stay home because you can’t afford a flight? Chances are, being with loved ones matters more than gifts.

“What will bring you the most happiness is being with family and friends, it’s you being there and your presence,” Storjohann told Yahoo Finance.

Don’t get caught up in Black Friday sales

Simply put, Black Friday and Cyber Monday sales should not be used to buy things you don’t need. “If you weren’t already going to spend the money, it’s not a deal,” said Storjohann.

So, before you shop, create a gift list with the amount you plan to spend on each person… and stick to it. A new flat screen TV sounds nice, but staying out a debt feels even better.

Plan better for next year

At this point, it’s probably too late to actually save money for the holidays, but that doesn’t mean you have to go into debt. Instead, monitor your spending, cut back where you need to, and start the New Year by planning for next Christmas.

Storjohann suggests setting up a separate savings account in January that you can contribute to throughout the year. “If you feel short on money every Christmas, then use next year to plan in advance.”

Brittany Jones-Cooper is a reporter at Yahoo Finance.

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