10 Steps to Planning Holiday Spending

By Jill (Staff Writer), on November 10, 2009

There are less than two months until Christmas — do you have a plan for holiday spending yet? Some people have already finished their holiday shopping. Others have been diligently saving all year long. Still others might be dreading the upcoming holiday season because of the cash outlay it usually involves. If you fall into the last group, here are 10 things you can do to make your holiday season a little less stressful.

Photo by dan4th via Flickr

1. Make a list: Create a list of all the purchases you will make that are specific to the holidays. Consider the people you will buy presents for and the specific items you will purchase. Think about contributions to holiday parties at work or your child’s school and any extra entertaining you might do at home. If you tend to eat out more when you are shopping, or because you are busier around the holidays, add a few meals out to your list. Finally, if you make charitable contributions around the holidays, add those to your list. Keep the list in a spreadsheet so you can add columns later.
2. Determine how much your list will cost you: Use a new column in your spreadsheet to assign a dollar value to every single item on your list. Be realistic, and overestimate if you’re not quite sure — better to plan to spend more, and have money left over, than fall short when it comes time to shop. Add up the amounts to get the total cost of your holiday shopping, giving, and spending.
3. Create a separate account for holiday spending: If you don’t already have one, create an ING subaccount, or a dedicated account at whatever bank you use. Resolve to funnel all holiday money through this account, so that you know exactly what comes in and goes out.
4. Assess cash on hand: Determine how much of the money you have right now can be used for holiday spending. If you’ve been saving all year, this might meet or exceed your cash needs. If this is the first time you’ve thought of holiday spending, this might be zero. Many of us will fall somewhere in between. Whatever it is, transfer that amount of money into your dedicated holiday account.
5. Calculate holiday budget shortfall: Subtract the cash you have right now from the total amount you need. This is the amount you somehow need to make up if you want to purchase all the items on your list.
6. Look at your budget: Look at your budget and determine places where you can cut your spending, even by a few dollars. Each time you get paid, add that amount of money to your holiday account. If your normal monthly budget doesn’t give you enough help, turn to one of these ways to access cash quickly. DO NOT tap your emergency fund, credit cards, or other long-term savings accounts to find additional money.
7. If necessary, edit your list: If you cannot find enough money to fund all items on your list, return to step 1 and start over by editing your original list. If you don’t want to cut people from your gift list, instead reduce the number of items you buy them or the cost of each gift. Consider making handmade gifts, or combining charitable giving with gift-giving by making donations in the name of your gift recipients.
8. Create a plan: Once your holiday spending list and budget are finalized, create a plan. Use another column in your spreadsheet to capture where and when you can purchase each item. Look in weekly ads and online to find the best deals. You can also use Ebates or Upromise to get cash back on online purchases — just make sure that you don’t spend more in shipping than you save!
9. Be smart with left-over funds: If you have funds left over, spend them strategically or not at all. If you have any outstanding debt, use the funds to make an extra debt payment. Another option is to leave the money right where it is to get a jump-start on next year’s spending! Do not use the funds to buy anything that was not on your holiday spending list — be confident that the list was good enough.
10. Get organized for next year: After the holidays, commit to saving for next year. Divide the total amount you spent this year (or the amount you would like to spend next year, whether higher or lower) by 12, and save that much money for each of the next 12 months. Make your shopping list early, and buy throughout the year whenever you find deals, or spot a special item that’s perfect for someone on your list. Organization is key to minimizing spending! Maybe by this time next year, you can join the ranks of those done with their holiday shopping.

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Jill grew up in Texas, graduated from college in 2007 and is currently working in the DC metro area. Jill recently completed a 9-month certificate program in financial planning and will take the Certified Financial Planner (CFP) exam in November. After that she hopes to become a full-time financial planner. You can also find her as a staff writer at My Dollar Plan.

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