Your fall action plan for a better holiday budget

Sing it with me now, “It’s the most expensive time of the year!” The gift-giving season is quickly approaching, but this year you will have the upper hand on how it impacts your wallet. Let’s start with the basics and learn a little bit about typical American spending habits during the “big four” season (Thanksgiving, Christmas, Hanukkah and Kwanzaa), and then dive into an action plan that can counteract the effects on your holiday budget.

On average, Americans spend about $1,000 on gifts, decorations, food and other expenses during the holiday season. You may be surprised to learn that almost a quarter of that is spent on food, and only a tenth of the total is spent on self-gifting. A thousand-dollar shift is a dramatic budget increase for just two months’ time. Let’s look at how to start prepping for it now!

1. Assess last year’s sneaky holiday budget and expenses

When you think of holiday expenses, does your brain go straight to the costs of gifts and then stop there? If so, this may be where even the most precise budgeters get derailed. Look at your credit card and checking account transaction history for October through December last year and add up every expense that you wouldn’t normally accrue in a holiday-free month.

Take special note of ATM withdrawals for cash tips given to mail people, Amazon drivers and your dog groomer. Don’t forget extra entertainment expenses such as Nutcracker tickets, extra gas fill ups, and even the multitude of white elephant parties you were invited to. Were you required to bring a dish to pass at those parties? This all adds up as additional holiday expenses.

2. Trim your gift-giving list in advance

Now that you’ve tackled step one to see how much the holidays truly add up, think back to your list of people outside your immediate family that you purchased presents for. One easy way to dramatically cut spending is to limit the number of people you give store-bought gifts to.

Set a max, your five very best friends will get purchased gifts, while everyone else on your list gets a plate of homemade fudge (or whatever else you’re known for)! After you’ve picked your list of gift getters, sit down and set a realistic budget for how much you’re willing (and able) to spend on each.

3. Ask for wish lists now

Saving and spending goals are all about making big purchases more manageable over longer periods of time. Once you’ve set your gift budget, ask your friends and family members for their wish lists far in advance—yes, even as early as September! While you’re at it, discuss spending limits upfront as a family so you won’t be tempted to splurge as you start shopping.

In the meantime, keep your eyes peeled for sales that may pop up before Black Friday. They seem to sneak up earlier and earlier as the years go by. Don’t be afraid to commit to a gift early if the price is right and you have allocated holiday money ready to spend.

4. Boost your holiday savings with no-spend days

Think of it as a spending cleanse right before the season of swiping. Pick three or four days out of the week and mark them in your calendar as no-spend days. This means no extra spending on food, entertainment, transportation, shopping online, etc. Meals are cooked with what’s in the fridge, there’s no extra money spent on rideshares, and you’ll want to skip your morning stop at the coffee shop.

Transfer any money you normally would’ve spent on these no-spend days into a high-rate savings account. You’ll be surprised how quickly three dining-out meals add up, and you’ll earn a great rate while you save the money for spending later in the winter.

5. Don’t forget to use a 0% APR credit card

When it is finally time to shop, make sure you use a cashback credit card or one with a 0% APR introductory rate. The average credit card interest rate is currently 16.22% APR. If you’re thinking of charging most of your holiday spending (let’s say $1,000) to your credit card, the interest charges could quickly add up if you choose to carry a balance.

A 0% APR introductory rate credit card could give you ample time to pay down your balance interest free, and could even boost your credit score, if used responsibly.

Following these five simple steps this fall will make this winter more manageable on your wallet, and will leave you better prepared to crush your financial goals in the new year!

Looking for more tips on how to prepare for holiday spending? Check out these other blog posts:

• How to maximize credit card rewards during the holidays
• Simple tips for making this year’s holiday budget
• Save on holiday gifts without feeling like a Scrooge

Claire Hegstrom is an advocate of the credit union movement through and through. Passionate about financial education, she approaches money conversations from a candid and inclusive space focused on growth and awareness. As our credit union founding father, Ed Filene, once said, “Progress is the constant replacing of the best there is with something still better.” Claire hopes reading Money Mentor will help transform your life from the best to even better.