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Holiday Budgeting 101: How to Stay on Budget with Holiday Spending

The holiday season comes with expenses like holiday shopping, gift-giving, and traveling to visit loved ones. Having a budget is an excellent way to stick to your financial goals any time of year, but it can be especially handy during this season when it's easy to overspend.  

With a plan for holiday budgeting, you can keep your spending in check and turn a potentially financially stressful situation into a satisfying one. The following holiday spending tips will help you reign in your spending to have a more meaningful and affordable holiday. 

1. Start Your Holiday Budgeting Plans Early

The earlier you start saving for the holidays, the less strain it will have on your finances. You can start by putting aside a certain amount from your paycheck every month and grow the funds gradually throughout the year. 

Also, see if you can trim your monthly expenses by taking advantage of sales, discounts, and coupons all year round to free up some extra cash. Savings can happen just by keeping an eye out for deals.

2. Set a Budget or Spending Limit

The best way to ensure you don't spend money you can't afford is to fix a holiday budget and stick to it. Budgeting for holiday spending can help you set a spending limit that reflects your current financial position. 

For example, create a dedicated account to keep your holiday spending plans separate from your day-to-day expenses. And if you're worried about overspending, create a budget plan with a list of things you plan to buy. This would help you determine how much you can afford to spend this holiday season. 

3. Gift What They Need

Gifting something small, but thoughtful—like a gift card—can be more impactful than an expensive gift that they may never use. A card to a grocery store or home improvement store is likely to be a big hit, especially for adult children or nieces/nephews who might be in college, their first apartment, or buying their first home. 

And with the U.S. inflation rate showing no signs of slowing, a practical gift card could be extra helpful this year. At the end of the day, you're giving something meaningful and also saving on holiday spending—a win-win.

4. Gift Experiences Instead of Physical Items

Physical presents are great, no doubt. But sometimes, the gift of experiences can be more worthwhile. Many people look forward to spending time with family and friends more than opening boxes of presents. 

Consider gifting experiences that may have more lasting joy, such as cooking lessons, tickets to a musical show, or even offering to babysit or dog sit. Gifting doesn't always need to involve spending on everyone in your life. The gift of your time is often the most appreciated. 

5. Gift Roth IRA or Emergency Savings 

If you're in solid financial shape as a parent or grandparent, you can set up your kids/grandkids/nieces & nephews with the fantastic gift of emergency savings or Roth IRA. It's one of the best ways to help them with their savings goals and prepare them for financial success. 

You can also give them money to contribute to a Roth IRA. Make it clear that you expect them to use the funds to jump-start their emergency savings. Or if they are still minors, you can open a custodial Roth IRA.

6. Donate to Charitable Organizations

How about you forgo the gifting and donate to a worthy cause in someone’s name? Yes, 'tis the season to remember the less-privileged. Rather than buying gifts, you can use the money to purchase food items and other daily necessities for charity. 

Some charitable organizations and groups also run charity drives and different programs to garner donations this time of the year. It's an excellent opportunity to give back if you can. And depending on the amount and the organization, there might even be a tax deduction in it for you. 

7. Build Better Spending Habits

When we talk about holiday budgeting tips, one of the most important is cultivating good spending habits. But first, you need to let go of any spending anxiety by having a positive money mindset and an attitude of gratitude.

Next, avoid spending with emotions. This is sometimes easier said than done, especially if you can't travel to see your loved ones. 

Finally, choose to pay with cash or debit over credit cards wherever possible. This stops you from getting carried away with spending and then suffering a financial hangover in the new year. 

8. Give Personal or Homemade Gifts

Are you skilled at something unique or fun? Why not use your talent to create a special and personalized gift you can share with others? A homemade gift can be just as meaningful and valuable to the recipient while saving you money on store-bought gifts. 

Whether it's baked cookies, hand-knit clothing, a poem, or personalized items from kids to grandparents, explore different creative ways to make gifts your friends and family will love.

9. Avoid ‘Buy Now, Pay Later’

The idea behind buy now, pay later is that you can immediately get the things you need, with a little extra time to pay for them. But that's also where the problem lies. It sends an implicit message to you that you can spend even more now, putting you at risk of blowing your holiday budget. What’s more, paying late or missing a payment can damage your credit score. Try to be wary of using BNPL to talk yourself into spending more this holiday.

Holiday Budgeting is Part of a Larger Financial Plan

As you get into the excitement of the holidays, take a pause and review your spending plans for the season. Viewing holiday budgeting as part of your larger financial and retirement plan helps you spend less and puts you on a stronger financial footing. 

The right financial advisor can help you reassess your financial goals towards investments, while also considering your current financial situation and future goals. They can help you crunch the numbers and create a holiday budget that fits your needs now and into retirement.

At Wealth Legacy Institute, we offer financial planning insights and more to help you stay on top of your financial goals.

Ready to plan for an enjoyable holiday as you head into retirement? Get our free Essential Retirement Planning Guide.

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Disclosure: For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based upon third-party data which may become outdated or otherwise superseded without notice. Third-party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Indices are unmanaged baskets of securities and are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio nor do indices represent results of actual trading. Information from sources deemed reliable, but its accuracy cannot be guaranteed. Performance is historical and does not guarantee future results. Total return includes reinvestment of dividends and capital gains. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this article. By clicking on any of the links above, you acknowledge that they are solely for your convenience, and do not necessarily imply any affiliations, sponsorships, endorsements, or representations whatsoever by us regarding third-party websites. Wealth Legacy Institute is not responsible for the content, availability, or privacy policies of these sites, and shall not be responsible or liable for any information, opinions, advice, products, or services available on or through these third-party websites. The opinions expressed by featured authors are their own and may not accurately reflect those of Wealth Legacy Institute®.

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