Easy Tips For Creating Your Holiday Budget

Yes, making a budget may take some of the fun out of the holiday season, but it’s a necessity to stay as debt-free as possible.

What does making a holiday budget entail? Just follow these tips, and you can have one sitting in front of you today:

1. Use last year as a guide.

If you’re creating a budget for the first time, you may have no clue where to start. Just look at last year’s holiday expenses, and you’ll have the perfect starting point.

Look at the previous year’s receipts or bank statements for the following expenses:

• Gifts
• Food
• Decorations
• Cards
• Postage
• Wrapping paper
• Travel
• Entertainment
• Donations

Include any other holiday-related expenses in your calculation. Once you have the final amount, use it as your guide for this year’s budget.

Do you see any unnecessary expenses? Highlight them before moving on to the next step, as they’re essential in yielding this year’s savings.

2. Determine how much you can afford to spend this year.

How does your monthly income stack up versus your expenses? Whatever money you have left after paying all your bills could be used for holiday spending. You probably don’t want to use every single cent, however, so figure out how much you can put aside for gifts and the like.

Depending on how late you start, you may not have time to save much disposable income from months prior. This lack of savings could affect your budget, but don’t let it cloud your judgment or cause you to panic.

If you don’t have much saved, try to cut anticipated holiday costs. It’s best to reduce spending instead of racking up debt that could hurt your credit score or ability to make future payments.

As you determine how much you can spend during the holidays, you may realize a budget constricts you more than before. Don’t look at this as a bad thing. Look at it as a way to build financial discipline and relieve financial headaches related to debt before they occur.

If you relied on credit cards in the past, think of how having to make payments on them year-round affected you. Did you enjoy seeing high balances well into the summer for all of those Christmas gifts you bought the year before? Probably not, and your budget this year can prevent that from happening again.

3. Prioritize spending categories.

Now that you have a certain amount set for your budget, it’s time to plan how to allocate it. By prioritizing categories, you can do this rather quickly.

For example, let’s say you want at least half of your budget to go towards gifts and their associated costs like wrapping paper, postage, etc. Next, come food and donations. And so on.

By prioritizing, you can focus on what’s most important. If you notice some categories are left with little money, you may decide to cut them completely.

Once you have your budget allocated, it’s time to start spending. Again, do not let the budget’s restrictions get you down.

After seeing how much you have to spend, you’ll likely get creative and selective with your purchases. In doing so, you’ll instill solid financial discipline that you can use throughout the year.