13 Sep

Written by Kathryn Vercillo on September 13, 2009

The Christmas holidays are less than four months away. For most of us this means that we’re entering the season of the year when we spend the most money. Between gifts for loved ones, travel to see family and the cost of attending holiday events, it can start to get so expensive that we wish we could just sleep through the whole season. It doesn’t have to be this way. With a good money-saving plan in place you can approach the holidays with a happy mindset. You can start now by implementing a five-step Christmas spending plan that includes budgeting, planning in advance for all holiday expenses and creating a debt repayment plan that gets you off to a good financial start at the beginning of the new year.

Budgeting for the Holidays

The first thing that you’ll want to do when creating your money-saving plan for the Christmas season is to create a budget. This should be done by considering all of the holiday expenses that you might have as well as the income that you have to pay for these expenses. Do your best to create a workable budget that is within your income range. However, be realistic when creating your budget. If you really do need to fly home for Christmas but the cost of travel doesn’t fit into your income situation then you can’t just pretend the cost doesn’t exist. You still need to create a budget and stick with it. Listing all expenses and all income options will help you make a budget.

Some tips for your Christmas budget:

• Create a plan to stagger your expenses. This will allow you to pay for Christmas expenses using the income that you have coming in rather than putting it all on a credit card. You can plan to make some specific purchases every two weeks or every month in accordance to when your paychecks arrive. Doing this allows you to avoid the interest rates that you’d accrue if you wait until December and put everything on a credit card that takes months to pay off.

• Look at all of the areas where you can reduce spending between now and Christmas. Living frugally during these months will free up some extra cash to put towards your holiday budget. Can the kids’ dance lessons or your gym membership be canceled for a few months? Can you skip Thanksgiving travel if you’re traveling for Christmas anyway?

• Make a written commitment to stick to your budget. Once you’ve created your budget, put it in writing. This will help you to resist last-minute impulse buys as the holidays approach.

Make Any Holiday Travel Plans Today

Once you’ve worked out a budget, the first area that you’ll start to spend some holiday money is travel. First you’ll want to ask yourself if you really need to spend the money on travel. If you fly home for Christmas every year, maybe you can skip this year or you can have the family come to you instead. If you take holiday vacations with your family, perhaps you’ll want to postpone that trip until later in the winter when travel may be less expensive. Think first about whether or not this is a holiday expense that you can eliminate altogether.

If you do need to travel for the holidays then make those plans now. Do some comparison shopping and use travel coupon codes to help you to get a good deal on airfare, accommodations and entertainment for your trip. Implement as many frugal travel tips as you can to keep this part of your holiday budget as small as possible. Think through the spending so that you have a holiday you enjoy but one which is still affordable.

Planning to Reduce Spending on Gifts

After you’ve gotten your travel plans out of the way then you may be ready to start thinking about Christmas presents. If you take care of travel this month then you can devote next month to dealing with gifts. Here’s how to handle this part of your Christmas spending plan:

• Make a list of everyone that you might possibly want to give a Christmas gift to. Remember to include people you feel obligated to give a reciprocal gift to each year and the friends of your children if you help out with gifts for them.

• Go through this list and ask yourself honestly why you want to give a Christmas gift to this person. Cross off anyone that you don’t have a good reason for gifting.

• Go through the list again. This time you’re looking to find anyone who you can get away with simply giving a card rather than a gift.

• Now you should have a smaller list of gifts that you need to get. This is where the real money-saving plan begins. You’ll want to first brainstorm a list of inexpensive or homemade gifts that you can give. These may include cookies, homemade gift baskets, photo albums, etc. Then you’ll want to match each of these affordable items to the people on your list.

• There should now only be a couple of people left on your list that you want to get store-bought presents for and on whom you may spend some more money. Since you’re planning in advance, you can really think through what a great gift for the person would be. Then you can do comparison shopping and look for coupons to minimize the costs of these gifts as much as possible.

• Do all of this on paper first. Make sure the total cost of your gift spending fits within the budget that you set forth at the start of your Christmas planning. If it doesn’t then you need to go through the list again and see where you can make some more adjustments.

Reduce the Cost of Attending Christmas Events

Finally, as the holidays get closer, you’re going to find yourself getting invited to numerous Christmas parties and events. Expenses for these include gifts for the host (or a bottle of wine for the party) as well as the cost of getting dressed up to go to the event. Some things to keep in mind to reduce spending in this area:

• Revisit your budget. See how much money you have left to spend and make sure that you are committed to not spending any more than this amount on the events that you’re invited to attend.

• Say yes only to the most important events. You shouldn’t be afraid to say no to the things that you don’t want to (or can’t afford to) attend. Everyone knows that we’re all busy during the holidays so most people will forgive you easily if you just say that you’ve already made other commitments.

• The clothing you already have is probably fine for the event. You shouldn’t overextend your budget by purchasing flashy new clothes for a single event. Try to make do with what you have for this year. Your savings account will thank you and no one at the party will notice.

Other Possible Expenses to Consider

Holiday travel, gifts and parties are the three most expensive areas of Christmas spending. However, there are other things that you may spend more money on at this time of year as well and you should be aware of those things. Holiday food, Christmas decorations and giving to charity are other common expenses at this time of year. If these are expenses that you typically incur then you’ll need to work them into your budget as well and find ways to reduce their cost this year. (For example you may volunteer your time instead of giving to charity.) Make sure that your savings plan is realistic for the way that you do holidays.

Rapid Repayment of any Holiday Debt

This multi-step plan should allow you to reduce the total amount of money that you spend on Christmas this year. It should also make it possible for you to pay for the holidays incrementally between now and then so that you don’t go into debt during December. However, it doesn’t always work out this way. If you do find that you go over your budget or had to spend more than you were making then you may be in debt at the end of the year. If so, it’s okay. Simply sit down and create a plan for rapid repayment of that debt so that the interest doesn’t add up. Frugal living, making some financial sacrifices and increasing your work load in January should help you to make sure that no holiday spending regrets linger long into the New Year.

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