BBB Tip: How to plan your holiday budget

Supply chain problems, shipping delays, and inflation can make it even tougher to create and stick to a budget during the holidays. This means that planning ahead and knowing your spending limits are more important than ever.  

How can you build a holiday budget that will cover buying for everyone on your list while keeping you out of debt? BBB recommends the following steps for calculating your seasonal budget and sticking to it.

How to make and stick to a holiday budget

• Calculate your debt. Before planning gifts and parties, take a look at how much you owe. Pay close attention to any debt that incurs interest. If you have more debt than you can pay off before the holidays, then you'll want to keep spending to a bare minimum. Remember, there are plenty of inexpensive and even free ways to show friends and family how much you love them during the holiday season.
  
  
• Project your income and expenses. Next, calculate how much money you will earn this holiday season. Review your income from the past three months to calculate an average monthly income. Now, you know how much money you have. Before you start setting aside money for holiday fun, make a list of any regular expenses you need to address. These might include utility bills, groceries, gas, and rent or mortgage payments. Don't forget about any annual fees that might come up around the new year, like HOA fees or your car registration. Subtract these necessities from your monthly income. Add any savings you've set aside for the holidays, and decide how much you can spend.
  
  
• Set up a separate holiday budget. Next, make a list of holiday expenses you plan to incur. Include all holiday-related expenses but divide them into categories: travel costs, holiday parties, decorations, cards, gifts, clothes, professional photos, gift wrap, etc. Add up the cost of each item and subtract it from your holiday budget amount. If you have leftover funds, great! If you are over budget, consider what items you want to prioritize and what items you can modify or cut from your list. For example, your budget might not allow you to host a 50-guest holiday bash for the whole block, but you may be able to afford an intimate family holiday dinner instead.
  
  
• Create a gift list. A detailed shopping list can be a huge help when working with a specific holiday budget. Write down each individual you plan to buy a gift for and add a price range by their name. Jot down a few gift ideas too. This preparation will help you do your research and find better deals when purchasing their gift.
  
  
• Keep track of your spending. This is one of the most essential tips on this list. By tracking your spending, you'll always know how much you have left to spend, when it is okay to splurge on an item, and when you're approaching your budget limit. Tracking your spending will keep you from making unwise purchases on a whim and help you avoid taking on unnecessary debt.
• Plan for inflation. Inflation can affect both your gift-giving plans and your daily expenses. Be sure to factor rising prices into your regular budget for items like groceries and gas. When working on your holiday budget, it's important to know that some gifts will cost more than last year, and they may never go on sale thanks to supply chain delays. Always do a price comparison before you buy a product, and don't be afraid to scale back on gift-giving this year if you need to.  
  
  
• Take advantage of sales, rewards, and cash-back offers. Take advantage of Black Friday deals, Small Business Saturday sales and Cyber Monday offers. If you are part of a rewards or loyalty program that offers special discounts or cash-back rewards, save money by using these promos to purchase gifts and decorations.
  
  
• Bundle your shipping. Free shipping may not be as common as last year, so double-check the store's shipping policies before you click the checkout button. In some cases, you may be able to get multiple gifts in a single purchase so you can reach the minimum dollar amount and qualify for free shipping.
  
  
• Avoid panic buying. Whatever you do, don't panic buy. Yes, many items will be in limited supply, but there are still many items you can purchase as gifts. It's never a good idea to pay more for an item than what it's worth just because it's in short supply. In fact, that's how many people fall victim to hot toy scams and counterfeit product scams each year.
  
  
• Consider alternative ways to gift. If your budget doesn't allow you to buy the extravagant gifts you once did, there are still ways to practice meaningful giving this holiday season. If you are creative, handmade gifts can mean the world to your friends and family. Is there a new mom or an older person on your gift list? Consider giving them a gift of service by offering to prepare dinner or clean their home. Talk to your family about holiday budgeting too. They may be in a similar situation. Some families cut down on gift-giving by doing a Secret Santa exchange with a set spending limit.

For more information

Get more advice by reading BBB's holiday tips and reviewing BBB's tips for smart shopping online.

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