The holiday season is around the corner. It's a time when certain businesses like retail stores thrive and personal bank accounts lose. If you're not careful, you could make your financial life more difficult than it is already. And you won't be the first one. That’s why it’s important to know how to approach the holiday season on a budget.
In a 2018 study by Magnify Money, close to 75% of Americans said they didn't prepare adequately for the holidays. And many of them ended up taking on more debt. The study shows that consumers took an average of $1,054 in debt.
This is quite unfortunate since holidays are predictable. This season, we want to see you close 2020 with financial success, not stress. So in this post, we share five tips to survive the holiday season on a budget.
Budget Based On Your Pocket Size
It is very easy to spend more money than expected during the holiday season. And a significant part of it goes to buying gifts.
But if you want to spend wisely budget based on what you can afford. Many people make the mistake of budgeting based on what loved ones want.
If you make the same mistake, you won't optimize your savings, pursue your financial goals, and seize opportunities to thrive. And while at it, make savings a priority in your budget.
Reduce The Number Of Gifts
As mentioned above, the majority of holiday overspending is on gifts. And although it is good to give, most of your loved ones wouldn't want you to get into debt to impress or make them happy. So find a way to reduce your list.
For example, you could suggest to your loved ones that no gifts will be exchanged amongst adults. You may be surprised to see everyone receiving it with joy.
But if adults must exchange gifts, strive to keep this budget low. Challenge yourselves to buy gifts worth less than $50. You will share the fun and experience finding creative gifts on that budget.
Reducing the number of gifts saves all of your time and money. So be the bold one in your family and opt for limited exchanging of gifts to reduce costs.
Involve Your Kids
Many parents tend to overspend to make their kids happy. This is why most of them allow their kids to make a list of what they want from Santa. But if you want to keep things under control, find a creative way to involve your kids.
Parents who have succeeded in this quest say they told their kids Santa gave every kid a certain amount. So they have to make sure that everything on their list should fall within that budget, or they would miss out.
You can borrow a leaf from these parents. Apart from helping your kids exercise in math, it will also prevent you from overspending.
Use Cash As Much As Possible
Using cards to pay bills tends to block our minds from processing transactions. And this increases the chances of overspending.
According to a study by MIT, shoppers spent up to 100% more when using cards to pay than those using cash. When people pay with cash, they know the cost of an item and are more likely to be careful. But when using cards, the cost seems to be less important at that moment.
So during this season, strive to use cash. This will make you more mindful of your spending and will keep you on budget.
Involve Your Kids
A popular Chinese proverb states: "The best time to plant a tree was two decades ago. And the second-best time is now."
But in the context of our conversation, this implies that if you want to survive the holiday on a budget, you should start preparing at the beginning of the year. But it's not too late to start now.
For instance, if you know you usually spend $1,200, create separate savings account for holidays. That way you won't feel like you're taking a hit financially since you will have spread the cost.
Studies show that people who have separate accounts for holiday funds have a less stressful holiday than those who don't. Even if this won't work this year, it will surely work in the future.
The holiday season can be challenging when you're struggling financially. But don't let it beat you into worsening your financial situation. Use these tips to improve your situation and at the same time enjoy the season.