Holiday spending is predicted to increase this year, with 30% of consumers intending to spend more in 2021 than they did in 2020.
While an increase in holiday shopping can bolster the economy, it can also singe deep holes in the pockets of everyday consumers.
Planning ahead will be essential for anyone looking to stay on top of their finances this holiday season.
If you’re worried about how this year’s holiday spending might impact your finances, we’re here to help. In this article, we share six simple practices to manage your holiday finances with focus and intention.
Look ahead before making a plan
Looking ahead is crucial to managing your finances better this holiday season.
The holiday season puts additional financial demands on consumers, causing many to rack up credit card debt. This often leads people to turn to credit repair solutions come January to fix the damage.
Before making a holiday financial plan, consider months like January, February, and March. Could your holiday ambitions deplete your funds in the months ahead? Will you go into debt unnecessarily to cover things like gifts or special outings?
Next, grab a pen and paper or a budgeting calendar and mark your projected starting and final balances for the winter months. Include your after-tax income, any monthly credits, and any fixed expenses you’ll have. If you’re engaged in remote work, remember to consider any potential remote work taxes that may apply to your income during this period.
Next, consider what your holiday spending might look like. Include trips, activities, extra meals, and gifts you’d like to cover in your projected spending analysis. Finally, look for details that suggest you’ll have low cash flow or excess debt based on your projected holiday spending.
Plan a thoughtful holiday budget
The previous exercise should’ve given you a clear picture of your financial health over the winter months with your current holiday plans in mind.
If it shows that you’ll have plenty of funds to carry you through the winter months, then congratulations. You shouldn’t have any dry months or excess debt this holiday season.
If the exercise showed you’ll have depleted funds and/or holiday debt, it’s time to rethink your current plans.
Here are a few quick tips to help you plan a thoughtful holiday budget either way:
- Build in an extra holiday cushion by rounding up your projected holiday expenses
- Open a curveball account to hold you over in case of a holiday emergency
- Open a holiday account with a specific budget and limit your holiday spending to that balance
- Don’t want to open two new accounts? Try the cash envelope system
- Set gifting spending limits for each gift or opt for Secret Santa gifting instead
- Set travel and activity spending limits that complement your holiday budget
- Be honest about activities or gifts you can’t afford and remove them from your holiday plans
Consider upping your investment contributions
While the holidays may seem like the worst time to up your investment contributions, doing so might help you breathe a little easier.
Upping your investment contributions isn’t just a great way to expand your portfolio. It can also help you feel more prepared for the future.
Crypto and NFT are also great options for investment, and you can easily track your profits with a crypto profit calculator. Also, remember to always remain compliant with your local laws and regulations regarding income and taxes.
If you’re unsure how to contribute to your investments wisely, or if you haven’t started investing yet, consider meeting with a financial advisor for support.
Before choosing an advisor, comb through plenty of reviews to make sure you’re hiring someone with ethics, integrity, and plenty of know-how.
At the meeting, be sure to bring an itemized list of your financial assets, financial goals, and risk tolerance. They can also help you choose from the multiple asset protection strategies you can pursue, ensuring your financial stability in the long run.
Get adequate sleep
An article by Hims and Hers indicates that sleep deprivation can be costly for a lot of people, as well as for their mental health.
Sleep deprivation can increase health risks and lead to costly medical bills. It can also impact your ability to bring your best self to work, which may lead to extended unpaid time off.
Proper sleep also promotes mental clarity, focus, and decision-making, all essential to making better financial decisions.
Being mindful when planning workloads this holiday season is pivotal to avoiding being overwhelmed when you return to work. Making sure you’re getting quality sleep despite any travel, holiday, or work plans is imperative to managing your holiday budget with care.
Be honest about your holiday budget
It may feel vulnerable to admit that you’re capping your holiday spending this year. But being honest about where you’re at financially is crucial to getting on the same page with those you’ll be spending the holidays with. And chances are, some of them are in the same boat you’re in.
When communicating any spending limits, you don’t have to share specific details if you don’t want to. Just keep it simple and solution-focused.
For instance, instead of saying, “I only have $50 to spend on our outing this weekend,” you might say, “I’ll be there for breakfast, but I’ll need to skip lunch.”
Stretch your budget with affordable holiday activities
Replacing expensive activities with affordable ones is an easy way to stretch your holiday budget without compromising on fun.
Here are some ideas for inspiration:
- Instead of going on a ski trip, attend a lively tree-lighting festival
- Instead of going to an expensive restaurant, share a cup of hot cocoa by the fire
- Instead of attending a costly cooking class, bake holiday treats at home together
- Instead of going to a comedy club, play group games or group sports
- Instead of going to the movies, start a holiday book club
- Instead of shopping for gifts at the mall, host a holiday crafting party
- Instead of taking an expensive day trip, plan outdoor exploration activities like hiking, bird watching, or creative scavenger hunts
- Instead of ordering in take-out, make smores and share holiday tales under the stars
With 30% of consumers intending to spend more on holiday shopping in 2021 than the previous year, it’s imperative to keep an eye on your financial health this holiday season.
Following the six practices we shared today can help you stay on top of your finances and manage your holiday budget.
Planning on using any of these tips? Leave a comment below to let us know how it goes.