With all the joy and festivities of the holiday season catching our attention at the end of each year, it’s easy to overlook the importance of planning for the financial costs of the season. Many people actively plan for the events themselves – the gatherings, gifts, and decorations – but don’t plan for the time and cost of those events. That leaves us with full bellies and cherished memories, but without proper planning it may also leave us with debt and financial stress. This article will discuss the areas you may want to consider when planning for your parties and gifting so you can fully enjoy the spirit of the season while managing your financial well-being. We’ll explain how to create a holiday budget, set purposeful spending habits, and even suggest a few tips in case you need to recover financially in January.
HighPoint Advisors, LLC helps individuals and families prepare for the giving season with smart, sustainable financial strategies. Located in Syracuse, NY and serving clients throughout Central New York and across the country, we provide professional guidance in wealth management, holistic financial planning, and more. Our advisors work with clients to help them feel more informed and prepared during the holiday season and beyond.
Start With a Holiday Budget
Creating and sticking to a budget is key. A great first step is to identify the types of purchases you need to plan for. Some categories may include gifts for friends & family, hosting expenses, travel costs, charitable donations, and meal costs. But don’t forget some lesser costs such as house decorations, wrapping supplies, holiday outfits, and greeting cards.
Figure out how much you can spend in total for the holidays, and then allocate dollar amounts to the various categories of your budget. Adjust if necessary, and adjust early to avoid unwelcomed surprises after the holidays.
Shop Smart
The year-end shopping season is one of the best times to find great deals. Black Friday and Cyber Monday are impossible to miss, but don’t forget about other online flash sales and promotions from specific retailers such as big box stores. Discounts seem to start earlier each year, so start planning your purchases early. Compare prices, use browser extensions, check rewards programs, find promotional codes, and use cashback apps. Remember to consult your holiday budget – check your spending limits and stick to them, even when deals look too good to pass up!
Another common holiday experience is a White Elephant exchange (or a Secret Santa exchange). These types of work or family gift exchanges can be fun, and usually involve pre-set dollar amounts for gifts. Shop early for versatile and fun items that fit the theme and spending cap of the event. That way you can deliver festive enjoyment for the group that won’t blow up your budget.
Also, if you’re charitably inclined and the holidays inspire your generosity, there are a couple ways to achieve your giving without negatively impacting your financial well-being. The easiest way is to set a specific dollar amount for your giving budget, and stick to it. Make your financial generosity intentional, not impulsive. Charities are grateful for any financial support they receive. For an additional (non-financial) impact you can also arrange to volunteer your time in-person at a charity that you care about.
The Cost of Hosting
We all know hosting an event and entertaining guests can be an involved process, but it doesn’t have to stress your finances if you plan ahead of time. Typical initial expenses you will want to consider are food, beverage, and decorations. Beyond that are the extras such as party favors, themed outfits, and increased utility bills.
Create your food menu early and do some grocery shopping ahead of time, or ask guest to bring a dish to reduce costs. You can also reuse last year’s holiday decorations – trust me, no one will know! This sort of structure will allow for a beautiful atmosphere for your guests and will keep you on-budget for the season.
And if You’re Traveling for the Holidays…
Traveling to be with friends or family for the holidays is notoriously expensive. Plan early, and book early! Book flights, hotels, train tickets, or rentals as early as possible to lock in the best rates. If possible, consider alternate nearby airports or even move your dates by a day to find better prices. You can also take advantage of credit card points or loyalty points for hotels and airlines. And don’t forget some ancillary expenses such as pet care, baggage fees, and transportation to hotels.
If you’re driving to your destination, make sure you estimate fuel costs, meals, maintenance, and parking costs. Regardless of how you’re traveling, plan for the time and possible delays. The more you can anticipate ahead of time the less you will stress.
Post-Holiday Financial Recovery
You estimated costs, you made a budget, but somehow you still stretched your finances too far. Now how do you recover and get back on track in the new year? The easiest way to figure out what went wrong is to compare your various budget categories to what you actually spent. Identify where you deviated, and think about why you drifted past your planned amounts. Decide if you need to adjust for next year.
Importantly, if you ended up having to use credit cards, make sure you prioritize paying off any leftover balances. The high interest rates that credit cards charge are a quick way to end up in a bad financial place after the holidays.
If you do have debts to pay off from holiday spending, consider a short-term spending freeze for yourself while paying off the debts. You can also use this period to rebuild your savings. That could mean replenishing your bank account, boosting other savings vehicles, or refilling your emergency fund. Some people even go as far as to have a dedicated “Holiday Fund” that they contribute to over the course of the year. That account is meant to be used for year-end holidays specifically so you don’t have to incur debts or draw down your bank account.
A Time of Joy, Not Financial Anxiety
While the end of the year holiday season can be expensive for many people, the intent of the season is to celebrate and make lasting memories. Time with friends and loved ones, generosity to charities you care about, and meaningful traditions are what make the year-end season special. With a little advanced planning and intentional spending, you’ll be ready to jump into the festivities without worrying about your bank account.
By establishing an appropriate budget, spending carefully, and having a clear post-holiday strategy, you’ll be able to party hard during the holidays and emerge after the new year in great financial shape. Our advisors at HighPoint Advisors, LLC enjoy learning about your holiday traditions, and are always ready to help you plan for them. Let us talk you through how to work towards taking the financial stress out of your festivities.
Contact us today and tell us what your ideal holiday season looks like!
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