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Creating Happy Holidays on a Budget

A woman holding a credit card and a tablet beside a lit Christmas tree
11.27.20
By: American Heritage

There are lots of reasons to love the holidays: the lights, the gifts, the time with family. But here’s something you probably don’t love: a big credit card bill or low checking account balance to start the new year. By some estimates, the average American spends around $1,000 on holiday expenses. However, with a little planning and smart purchases, it’s possible to enjoy lots of holiday fun without spending lots of money.  

 

1. Create a Realistic Budget

Financial advisors recommend that your total holiday budget (including entertaining and travel) should not exceed 1.5% of your pre-tax income. When crafting your holiday budget, keep this figure in mind. For example, if your annual income is $50,000, make sure your holiday budget doesn’t exceed $750.

To stay on budget, be sure to track your spending. You can use the American Heritage Mobile Teller App to easily view balances and recent transactions, and even create a personalized spending plan, so you can keep holiday spending under control.

 

2. Make a List, Check It Twice

Create a definitive list of everyone that you want to buy gifts for. Don’t forget to include holiday gratuities and gifts for coworkers. Next, break the list down into gift levels, such as:

 

  1. Spouse and children
  2. Other family
  3. Friends
  4. Everyone else

Finally, assign a gift amount to each person based on their “level,” assigning higher amounts to higher levels. You can fine-tune your numbers or edit your list, as long as you don’t exceed your budget limit.

 

3. Be Smart About In-Store Shopping

Now that you have your budget, it’s time to start buying your gifts. But before you head to the mall, do your homework. When you go to the store without a clear plan of action, you’re more likely to overspend or buy gifts that you don’t need. Instead, create a gift list that syncs with your budget. Research ideas online and search for holiday specials, coupons, and promo codes that can help you get the best price.

Once you’ve targeted your ideal gifts, either order them for in-store pickup or take advantage of free delivery promotions. You’ll save time and money and avoid the crowds – which is especially important this year.

Another great way to save? Take advantage of Free Shipping Day on December 14 to save on shipping at hundreds of participating online stores.

 

4. Give of Your Time & Talent

If you’re having a hard time finding affordable gifts for friends, acquaintances, or colleagues, look for creative ways to show you care without spending a lot. Everyone loves baked goods, especially when given with decorative flair. Offer loved ones gifts of time, like cooking lessons, making freezer meals, tech support, decorating, organizing, or babysitting. Whatever you give, personal is better than expensive every time.

 

5. Party Smarter

Obviously, holiday parties will be limited this year due to social distancing, and any get-togethers will be on the smaller side. If you do plan to have some family or close friends over, save on the cost of entertaining by making it a potluck or asking your guests to bring beverages and desserts. Remember, whatever you spend on the party needs to be a part of your overall holiday budget.

 

6. Simplify Gift Giving

When you have a big family or a large circle of friends, the cost of buying gifts adds up fast. Talk to your loved ones about doing something simpler this year. Instead of having everyone buy gifts for everyone else, consider doing a Secret Santa with a modest price limit per gift.

Or, some families follow the “Four Gift Rule” (particularly when they don’t have young children), in which each person gets a maximum of four gifts from everybody else, with one gift per category:

 

  • Something they want: something from the person’s wish list
  • Something they need: something they could use, like a household item
  • Something to wear: an article of clothing
  • Something to read: like a book or online magazine subscription

You and your family can modify this approach in any way that works for you. The point is, you’ll limit the number of presents and the amount of money each person spends over the holidays. Chances are, you’re not alone in looking for ways to cut costs, and great holiday celebrations are about spending time with the people you love – not just about getting more stuff.

 

7. Start Saving for Next Year

Want to have more money for the holidays next year? Set up a special savings account and automatically deposit a set amount periodically to grow your holiday fund. Even depositing an extra $50 a month into a Holiday Club Account can give you an extra $600 to put toward a special gift or family trip next year.

 

8. Use Debit, Not Credit

Afraid you’ll still go overboard? Resolve to only use your debit card when making holiday purchases. By paying directly from your checking account, you’ll have more motivation to stay on budget and not overspend. This helps you avoid having to pay off a credit card balance in the new year (and the potential interest that comes with it).  

And if you like earning rewards on holiday shopping, we’ve got you covered. American Heritage offers the Independence Debit Card with ScoreCard® Rewards. For every $2 you spend using the card, you earn one ScoreCard Rewards point that you can use on lots of great rewards – turning gifts for others into perks for yourself.

 

 

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