Budget Planning for the Holidays

Daniel Penzing
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Step One: Make a List!

Take all the things you want to buy and write them down, or keep a running list in a Word Document that you can refer to. Better yet, have a friend help you so you don’t forget things.

You’ll want to consider all the expenses that fall within your budget. In addition to the usual smaller items, you may have larger items, such as a larger appliance, a professional grade power tool, or a new car.

Step Two: Decide How Much Money You Can Spend

Before you start shopping, make a list of all the people who you are planning to buy presents for. Next, estimate how much money you can spend on each person. How much do you plan on spending on each person? Will you be buying for children or just adults? This will also affect your budget.

Some people have a certain amount they are willing to spend for holiday gifts, while others are prepared to spend whatever it takes. And some people have a budget for how much they can spend on gifts for just a few people, while others want to spend more. You may feel it’s impossible to keep that level of control over your spending, but if it’s important to you, decide on a budget for each person early in the holiday shopping season.

Before you shop, determine the size of your budget and figure out how many people receive gifts from you. You should also consider money for stocking stuffers, cards, postage, and additional holiday spending.

Step Three: Assign Dollar Amounts to Each Item on Your List… and Stick to Them!

You probably already have a budget in place, but, just to make sure that you’ve got it right, this is a good time to check. Create a Budget worksheet, and list each item you’ll need to buy. As you do it, assign a dollar amount to each one.

The dollar amount you’ve assigned to a particular item should be how much you actually want to spend. So how do you set these dollar amounts? Well, it’s important to remember that you don’t need everything in your list. With that in mind, here are a few guidelines:

Use Gift Cards whenever you can. Unless you truly do not want the gift card, you should get one. From the perspective of your budget, the gift cards are the best thing you can do. They give the recipient choice, but with your money.

If you think you can do better than the gift card, then by all means give another gift.

Odd as it may sound, you should, in most cases, stick to your budget.

Next Year, Start Saving in January!

I hate to break it to you, but chances are good that you are NOT going to begin saving the common wisdom amount – 10% – of your income every month. You won’t, because absolutely everybody who has a job in America has a budget constraint. They have bills and payments that eat up this 10% in the first few weeks of the month.

The fact of the matter is that they pay their rent and their car payment. They pay their utility bills and their health insurance premium. They put down a deposit on their kid's braces and catch up on bills leftover from last month's vacation.

There's nothing to save at the end of the month, and the reality is that it is hard to set money aside when you have tons of small bills taking up all of your income. What do you do- skip the electricity so your microwave doesn't break?

Get a cheaper car in order to pay for cable? Drive a '78 Jeep instead of a newer, more efficient car because it saves on gas?

A good idea is to start budgeting for the holidays *after* the holidays have passed. Start saving when the last bill is paid. The next time you actually have 10% to put away before you turn on the lights at night, start saving that money.