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Buying Holiday Gifts Without Breaking the Budget

The holiday season is in full swing and you are probably trying to balance your desire to buy gifts for family with your aversion to lots of debt. I thought it would be useful to share some ways that I prepare for holiday expenses.

Use a Savings Account and Pay with Cash 

Each year, my wife and I put money into a separate holiday savings account. This is a wonderful way to stay organized and, more importantly, stay on budget. Each paycheck, we have a set amount of money that comes directly out of our payroll, and gets put straight into this savings account.

You don’t need to put a lot of cash in it each week; a little goes a very long way. For example, if my wife and I get paid on opposite weeks, and each put in $20 per paycheck (automatically), this adds up to be $1,040. This is the amount we allow ourselves to spend on holiday gifts. Budgeting is a plan on how to spend your money, so let’s look at setting up a plan that is right for your family and how much you’ll need to set aside:

  • Determine how many people you are going to buy for
  • Determine how much you want to spend on each person
  • Add up these amounts, and this becomes your “Holiday budget”

Once you have your dollar amount, take this number and divide by the number of paychecks you receive in a year. This is the amount of money that will automatically come out of your payroll, into your holiday savings account, such as an Old National Christmas Club Account, each time you get paid. At the end of the year, you have successfully saved your “budgeted amount” of spending to avoid building credit card debt, and going into the holidays a little bit less stressed. 

To make the most of your holiday savings account, be sure not to spend it on something else! My personal recommendation is take out the cash, in large bills, and place it in envelopes (one for each person you are buying for). The reason I recommend large bills is that you are less likely to break a $100 bill than you would be a $20. When you are faced with purchasing an item on your list, you may think twice about it if you are going to have to break that “Benjamin”. This really helps us stick to a list. 

If you are in a committed relationship, I also recommend working together when shopping during the holidays. Hold each other accountable to make sure this amount of money gets you through all your holiday shopping. Also, working together when it comes to the area of personal finances is a wonderful thing. I have personally witnessed couples’ relationship improve when they are on the same page when it comes to managing their income and expenses.

Make a List and Stick to It!

This is not new advice, but we should always keep it in the forefront of our minds, especially during the holidays. Write down what stores you want to buy from, along with what items you want to purchase. Do your homework and find out who offers these items at the best cost. This will help you save money for gifts that you may have forgotten about, or maybe even a little extra to spend on your significant other. 

Avoid Emotional Spending

Throughout the year, everyone deals with emotions at one time or another. Many times, this turns into spending. When people are having a bad day, they want to do something that makes them feel better and this often means dipping into the credit card and buying something nice. 

Sticking to a budget can keep your spending in line and buying within your budget, not just because your kids were good this year. When it comes to kids, remember, often grandparents will buy plenty of extras to make those kiddos happy. Let them do the emotional spending!

Avoid Opening New Credit Cards

Stores will often offer incentives to open a store credit card. They aren’t just doing that to wish you a happy holidays. Remember, they want you to spend money in their store, and the bank wants you to pay interest.

The average person already has multiple credit cards in their purse or wallet, and now is not the time to add to the list. Consider this, if you had one pocket with a credit card, and one with your hard-earned cash, which would you spend less with? Credit cards can tempt us to overspend, and you could end up paying for this year’s holiday gifts (with interest), for the next ten years.

Save Your Change

If you have come up short when saving for your holiday shopping, save your change, all of it! Every day, most people will empty their pockets full of change or random dollar bills and use them at vending machines, gas stations, etc. Instead, put it into a jar or piggy bank. Old school? You bet, but it works, and it adds up over time. It’s probably a bit late to start saving pennies now, but it’s never too early to think about next year.

Now it’s now time to put it in action. Being organized and having a plan brings less stress to you and your family during the holiday season. 

I hope that you and your family have a happy holiday season and wish you the best on your journey to being one step closer to being in charge of all your finances!

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