Monday, 30 September 2019

The holidays can be a joyous time filled with gifts, parties, family and friends. But they can also be filled with stress as many individuals and families struggle with how they will pay for all the seasonal expenses.

According to a 2018 survey by the National Retail Federation, the average consumer spends approximately $1,000 on the holidays. About two-thirds, or around $637, is spent on gifts, while another $215 goes for food, decorations and other items. About one in four Americans travel during the holidays, which could cost them an additional $930 or so, according to Experian.com.

When you consider 40 percent of Americans say they would have difficulty covering a $400 emergency expense, you can see how forking over between $1,000 and $2,000 for the holidays could be a source of stress for many households. And that stress can often translate into debt as Americans who turned to credit cards to pay for holiday expenses in 2017 added around $1,000 to their balances.

No one wants to pinch pennies during the holidays. But with careful planning and thoughtful budgeting, you can still enjoy this special season but with less financial stress and strain. Here are some suggestions:

Make a holiday budget

First, it's important to figure out how much you can comfortably spend. Some financial experts recommend spending no more than 1 percent of your annual income. So, if you make $50,000 a year, a reasonable budget would be around $500.

Of course, your holiday budget should be determined by looking at your household budget and figuring out how much discretionary income you have. Remember, you can always cut back in some other areas to loosen up some cash for Christmas. But to avoid stress, debt or dipping into your savings, it makes sense to determine a reasonable number and stick to it.

Start saving early

While the idea of a Christmas Club account might sound a bit old-fashioned, it's a smart way to supplement your holiday budget. If you're able to put $100 a month in a designated savings account starting in January, you'll have a nice chunk of change when Black Friday rolls around. Even if you can't save $100 a month, saving a small amount each month can result in a nice little bonus at the end of the year.

Set spending limits

When it comes to gift-giving, you obviously can't — and shouldn't — spend lavishly on everyone on your list. To make sure you don't, limit the amount you can spend on each person. For example, for co-workers or other acquaintances, cap spending at $10-15. For non-immediate family members, $25-30 might be a good number, while you could opt to spend $50 or more on your children and partner.

Your total budget will help determine these spending limits. If your total holiday budget is $300, you'll have to scale those numbers back a bit. But if your budget is a larger number, you can spend more per person.

Take advantage of sales and specials throughout the year

If you're one of those people who starts snatching up post-holiday deals on December 26, good for you, because you're probably getting some great deals. Even if you're too tired to hit the stores after the big day, taking advantage of sales and discounts throughout the year to purchase holiday gifts can still save you a bundle.

Shopping for gifts throughout the year can also help you avoid impulse buying. You know, when you panic three days before Christmas and are willing to spend anything to find the right gift. We've all been there, and our bank accounts have suffered as a result.

Go small

First of all, you probably don't need to give a gift to everyone you know. Try to cull your gift-giving list down as much as possible. For those who didn't make the cut, a small gesture such as homemade baked goods or a holiday card could be fine. The truth is, you're probably not the only one trying to save during the season, and a small token that doesn't require a reciprocal gift could be greatly appreciated.

Don't be afraid to discuss holiday spending with friends and family

Chances are other people in your family and social circles are also stressing about holiday expenses. With this in mind, consider talking to family and friends about ways to cut back. For example, family members agree to buy gifts for the children only, instead of giving to everyone. Or you might decide to eliminate gifts altogether and instead have a family outing or volunteer at a shelter. Dinners could be pot-luck, or friends could agree to meet for just appetizers.

While expensive gifts and fancy meals can make the holidays special, they're not essential. Spending time with family and friends is what really matters, and with some planning, creativity and communication, that doesn't have to cost much at all.

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