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The weather is starting to cool down. You can snuggle up by the fire with a good book, listen to Christmas music on repeat, and spend time chatting with friends and family over a nice meal. What’s not to like?
The holiday season warms our hearts and souls, but it’s never as hard on our wallets. Basically, according to an October 2022 Gallup study, the average U.S. adult will spend $1,932 on gifts this holiday season.
And information from round-trip booking app Hopper predicts that the typical round-trip airfare for travel during this year's winter holidays will come in at $1,463 — which is $391,300 higher than the same period in 2021 and $311,300 higher than in 2019. Ouch.
Unfortunately, these expenses are just the tip of the iceberg. What about accommodations and meals? And all the different little expenses that add up.
There’s no denying that the holidays are probably the most expensive time of the year. But with proper planning, you’ll be able to pay those fees and keep them from hitting your pocketbook this winter.
Here, we’ll share seven essential finance management tips to help you move in the right direction and avoid taking on debt during the holiday festivities.
Let's dive in.
1. Create a financial
Knowing how much money you have coming in versus going out can help you check your spending vigor this holiday season.
Not tied to the delivery location? Follow the 50/30/20 rule, where you allocate 50% from each paycheck to necessities, 30% to discretionary items (like break purchases), and at least 20% to your savings.
The key is to create your vacation budget as early as possible. The more time you save, the more funds you will have to spend on your vacation spending categories.
Some standard spending categories consist of:
- gifts
- break in the trip
- Food
- fun
- break decoration
Use spending habits from previous years to help examine how much of your funds to allocate to each category.
Luckily, your bank and credit card statements tell you everything you need to know about what (and where) you spent last season to help you set a practical budget for the next 12 months.
Then create accounting experiences to help you stay on top of your finances and judge how much to spend and shop this holiday season.
2. Track your spending
The holiday season can be full of temptations. If you’re not more careful, it’s easy to let your spending get out of control—and then you’ll find yourself biting off more than you can chew.
but if you keep track of every penny of where you are spending your funds, you may be more likely to stick with your pre-set finances.
So, take inventory of all the things you’ve ever bought for yourself and others. This registry can include everything from gifts for friends and family to decorations for your apartment to little treats you’ve been wanting all year (like that shiny new pair of rings).
Next, write down how much each item costs—including same-day delivery prices if necessary—and then add it all up. Subtract the total from your allocated budget to determine how much money you could have left to spend by Christmas Day.
3. Maximize rewards and perks
Some people live far from credit cards to avoid getting into debt.
However, when used responsibly (the most practical way to spend the money you could find the money for), there are many credit card advantages that you can put to good use throughout your vacation.
There are many credit cards on the market today that offer amazing credit card rewards courses, such as the Chase Sapphire Reserve for everyday travel and the American Express Blue Cash Favored Card for cash back.
Plus, these rewards are easy to earn. All you have to do is use your credit card when making your larger purchases (like gas, groceries, bills, etc.) and you’ll earn rewards or features. For example, with the popular American Express Blue Money card, you can earn 6% cash back on all grocery purchases (up to $ 6,000 over 12 months).
You’re trying to do your Christmas shopping with credit cards that offer the best rewards or cash back. You may have already budgeted for this expense, so why not earn essentially the most rewards in exchange for spending that money?
Even the student bank offers a lot of cash back rewards. So don’t sleep on these money-making alternatives for spending money. It’s a no-brainer.
four. Avoid impulse purchases
It can also be hard to resist the urge to buy multiple gifts for your family, especially when your credit card is burning a hole in your pocket.
However, don't get carried away by the generous spirit. If you do, you're likely to end up spending a lot of money and regretting some of those purchases later down the road.
Instead, before you buy anything else, give yourself 24 hours to think and ask yourself some of these questions:
- Do I want this merchandise?
- Does this item fit within my budget?
- Will this merchandise always be on sale for the next 30 days?
- Would I be saving my money to go against something else?
If you wake up the next day wanting to pull the trigger on the purchase and it's the most economical one, it might be a shoo-in. But when you wake up and don't remember the merchandise, then it should or shouldn't be left as is.
5. Start a side hustle to make extra money
Two income streams are better than one. So if you feel like your money has been tight this year, it doesn’t hurt to find another source of income to help cushion your interest bill.
You can always practice this for a second job, like offering programs for us during peak hours. Or you can take a bigger entrepreneurial path and start a side hustle that generates income long after your vacation.
For example, if you are artistic and enjoy writing, you might look for a remote freelance writing job that you can do from the comfort of your own home.
There are plenty of inspiring success stories to encourage you, such as a 28-year-old who went from £36,000 to £378,000 a year by taking on freelance writing jobs.
But remember, a jumble of aspects is like running a business. Just as utility companies need to keep an eye on SaaS metrics to survive, you need to closely monitor your profit and loss to keep your side hustle running smoothly.
With a lot of hard work and dedication, a side hustle can change your life forever.
6. Avoid buy now, pay later alternative options
Buy now, pay later (BNPL) are harmful pricing alternatives if you are trying to control your budget.
These billing methods make it very easy to spend more funds than you can afford and set an unpleasant precedent for a way to spend your money sooner or later.
Why? Because they capture your attention during checkout by offering alternative bite-size pricing options that make your purchase seem cheaper.
But many of these plans will penalize you for paying late and offer no benefit to your credit score for timely funds. Plus, non-price-related late fees are much higher than those charged by general credit cards.
If you’re not sure you can afford a closed-book item, think twice before using a BNPL plan. If you do decide to go for it, here’s an overview of the terms and conditions to keep in mind when your payments are due and how many late fees or past-due fees can accrue.
7. Open a high-yield savings account
A high-yield savings account is arguably one of the best places to park your holiday savings. A separate account takes away the stability of your everyday savings. And with it out of sight, it’ll be less tempting to use it to fund your next purchase.
Along with your money safely tucked away, it can grow as high-yield hobby rates increase. So if you can access your money to shop throughout the holiday season, you'll have more money in your account than before.
You can use your earned hobby to fund some of your break expenses. Sounds idyllic, right?
Packing up
Don't let the holidays get in the way of your financial goals. Nothing feels better than starting the new year with the right music and your finances.
While it may be tempting to treat your spouse and children during the holidays, it's important not to overspend.
With these basic tips, you can better manage your money during this busy 12 months and think confidently about your finances in 2023.
