Although the holidays are a great time for most people, the truth is that your finances can quickly grow out of control in this season.
Between gift-buying, traveling to see loved ones, and covering year-end expenses, it’s very easy to go off budget.
The good news is that with just a little planning, you can avoid the uncertainty and stress that come with not having control over your finances.
Let’s explore how to prepare for holiday spending while not forgetting about annual costs without sacrificing the joy and generosity of the season.
Why It’s Important To Do Some Seasonal Budgeting
Holiday spending isn’t just about gift-giving. As we mentioned before, there are costs related to travel, decoration, food, and unexpected things, such as hosting duties and donating to charitable organizations.
The numbers are very clear: the National Retail Federation concluded that the average holiday shopper spends almost $1,000 during the season. Without a clear plan, these expenses can lead to debt that lingers into the new year and brings you stress.
During this time, you need to consider annual expenses as well, such as property taxes, insurance premiums, subscription renewals, and more. If you include your holidays in your annual budget, you are one step closer to ensuring that you stay financially healthy throughout the year.
3 Steps To Prepare For Holiday Spending
You might be feeling overwhelmed looking at the expectations people have for the holiday season. From parties and gatherings with friends and acquaintances to work events and family duties… it all piles up in the last two or three weeks of the year.
Fortunately, you can prepare for this without having to break the bank. Let’s review the steps you can take to enjoy the holiday season.
1.Be realistic with your budget planning
Get in detail in your spending plan. If you go overboard, you can always celebrate into the new year.
Make a list of what you expect to spend on gifts, travel, and celebrations. Stick to the limits you’ve set, which can be hard, but it’s important so that you don’t get into debt.
A few apps let you input your expenses in real-time, like Mint of YNAB.
2.Start saving months in advanced
You should set aside money from the beginning of the year. Create a dedicated savings account just for holiday spending, or separate some cash.
Even if you’re starting late, when you cut out discretionary spending now, it can help you save money for the holidays.
3.Track expenses
The habit of tracking purchases and expenses is very healthy. Some apps can help you keep track of what you spend your money on. It helps you stay on budget and allows you to adjust throughout the year if you need it.
Keeping Your Finances Online Protected
People shop online a lot more than they did ten years ago. While you can find great deals for gift-giving online, your financial security should be your priority.
Cybercriminals tend to attack on special dates, like Cyber Monday or Black Friday, and they target shoppers with fraudulent websites and phishing scams.
When you use a virtual private network, you can encrypt your connection and protect your credit card details and personal information from hackers.
Especially if you use public Wi-Fi networks, you need to protect your transactions and remain secure.
Preparing For Annual Expenses
You must plan out the year as much as possible, even though nobody can be completely certain that things will go exactly as you’ve planned them. Account for emergencies and the goals you have for this year.
1. Review your yearly financial obligations
You should be able to identify recurring costs, like insurance premiums, loan payments, memberships you’ve acquired, and more. Mark the due dates on your calendar so that you’re not surprised when your account shows less money.
2. Don’t forget about inflation
You can calculate the yearly inflation approximately, and you can make monthly adjustments if the numbers change. In the same vein, you can build a buffer if the prices suddenly rise a lot more than you expected.
3. Make a plan for tax season
Set aside funds for property taxes and income taxes that you have to pay early in the year. The IRS suggests saving 20–30% of your income for taxes if you’re self-employed, for example.
To Sum Up
When you take the time to plan your seasonal budget, you can enjoy the holidays without the stress of worrying over money in the upcoming months. It’s important to start the year right, on solid footing.
Plan out your yearly expenses (don’t forget about any major financial goals!), make adjustments if there’s inflation, and pay your taxes on time.
Start the year in the best way possible!