published 22 November 2023
Although many people’s finances are in a better position today than they were a year or two ago, this holiday season could still be tough. Holiday shopping can be expensive, especially if you have a lot of people to shop for. Therefore, it’s crucial to have a plan in place before you head out.
If you’re not careful, your generous gift-giving could harm your finances. Given inflation and high interest rates, here are four strategies to consider for your holiday spending.
1. Have a budget and a plan.
To avoid problems during a year filled with inflation issues, you first and foremost need a spending plan. Take a closer look at your finances and determine how much you are comfortable spending this holiday season.
Sticking to a budget or spending plan will help you avoid falling into credit card debt or dipping into your savings to pay for gifts. If possible, I recommend creating a separate account dedicated to holiday spending. This will allow you to build holiday savings without harming your ability to pay for everyday expenses.
- Make a list of every person you need to buy for.
- Determine what you want to buy for each person and how much each item will cost.
- If you can, start shopping early to spread out your spending.
- Keep tabs on any items that may go on sale to save money.
Last-minute shopping is the easiest way to overspend and drain your finances.
2. Pay down debt.
Over the past few years, many individuals have turned to credit cards for everyday purchases, leading to skyrocketing credit card debt. Americans currently hold more than $1 trillion in credit card debt. Consequently, don’t add to an already high credit bill by overspending during the holiday season.
Having a plan in place and starting early should include paying down any existing debt. First, get organized. It’s hard to tackle your debt if you’re unsure of what you owe. Take inventory of every credit card and determine how much you owe on each.
- The avalanche method focuses on tackling the debt with the highest interest rate first.
- The snowball method emphasizes paying off the credit card with the smallest balance first.
Whichever method you choose, ensure you are paying more than the minimums and utilizing any additional funds to pay down debts.
3. Use cash.
One of the best approaches to holiday shopping is to use cash instead of credit cards. By choosing not to use credit cards, you avoid adding any additional debt.
Once you determine how much you’re willing to spend on gifts, withdraw that amount from your bank account. As soon as you run out of cash, that’s it! No more spending. This strategy ensures you don’t bust your budget while holiday shopping.
4. Take care of yourself.
When creating your holiday spending plan, don’t forget about your own financial health. This doesn’t mean buying yourself an expensive holiday present but rather continuing to invest in your retirement.
Keep putting money away in your retirement accounts. I recommend setting aside 10% to 15% of every paycheck, and this habit shouldn’t cease during the holidays.
Consider automating your contributions. By establishing automatic contributions, you avoid the temptation to spend that money on holiday gifts or other impulsive purchases, allowing you to maintain control over your financial future.
Saving money during the holiday season may feel impossible, especially with inflation and high interest rates, but there are ways to help ensure you don’t overspend. A financial adviser can help you create a sound financial plan that will allow you to enjoy the season without stress.
Disclaimer
This article was written by and presents the views of the contributing advisers, not iBestTravel’s editorial staff. This content is prepared for informational purposes only and does not address specific investment or financial situations.
