Holiday shopping can put a major strain on anyone’s budget, but some simple planning can help you control its impact on your family’s financial health. Rather than allowing the frenzy of Black Friday and pre-Christmas bargains to carry you into a bacchanalia of careless spending, plan ahead to avoid the financial hangover that inevitably follows.
If you don’t have a budget, make one now.
A household budget is the foundation of any effective family financial plan. If you do not yet have one, start by taking stock of your current income and regular expenses. It may be helpful to look back through a few month’s worth of bank statements to get a clear picture of what you have coming in and going out and where it goes each month.
Consider how much you have to spend on non-essentials.
Whether it feels like it or not, gift giving is an optional expense. Many experts recommend allocating only 30% of one’s monthly income to non-essentials while devoting 50% to necessities and the other 20% to financial priorities, such as debt payments, retirement savings, or building a down payment for a first home purchase. Although 50/20/30 is a handy rule of thumb, it doesn’t fit everyone’s needs. However you do it, take an honest look at how much you can reasonably spend above what you need to provide for your family’s current and future security. Understanding how much (or how little) extra cash flows through your hands can help you rein in the generous but destructive impulse to give gifts that you really can’t afford.
Lay out your budget for each person on your list, and shop wisely.
Once you have decided how much you can afford to put into your holiday shopping budget, go through your list of recipients and decide how much to spend on each. With these limits in mind, jot down some gift ideas for each person, and then do some investigating. Researching product reviews, sales, and comparative prices can help you stretch your holiday budget to cover thoughtful and high-quality gifts for your loved ones.
When buying online, remember to account for shipping and handling costs in addition to an item’s listed price. Often, vendors will waive shipping fees you spend a threshold amount. Consider purchasing multiple gifts from a single online store to keep shipping costs to a minimum.
Don’t forget your other holiday expenses.
Holiday spending is not limited to gift purchases. If you host a family meal or a party for friends, if you take a trip, take extra time off work, or buy decorations for your home, remember to include these costs in your holiday budget.
Often, the best gifts do not come from a store. Consider your personal talents and skills. Are you able to create gifts in your kitchen, workshop, or studio that your family and friends will love? If you have multiple people from one household on your list, can you cut your costs by giving them one gift that they would all enjoy?
Start a fund for next year.
Plan ahead for next holiday season by putting a little aside each month in a gift fund. This can go a long way toward softening the impact of holiday shopping. The goal should be to spend only cash on gifts; racking up credit card debt that you cannot immediately pay off is the most expensive way to shop.
Boelman Shaw Capital Partners assists our Des Moines area clients with family financial planning, including retirement, college savings, and tax planning. Contact us to find out how we can help you take control of your finances.
Material discussed herein is meant for general illustration and/or informational purposes only. Because individual situations will vary, the information shared here should be used in conjunction with individual professional advice.