With the holiday season quickly approaching, we tend to find ourselves scrambling all over the place, whether it is going store-to-store trying to complete your holiday gift list or cleaning up your house to have friends and relatives over. Yet at a time when individuals should have the most joy, they often find their stress levels at an all-time high. This is due to the desire to be perfect. While we try to satisfy everyone’s wants and needs, we fail to consider a budget. While some are quick to rebuttal claiming “you can’t put a price on happiness”, they are quickly reminded how important budgeting is when they see their bill come January. The purpose of this blog is to help people satisfy the desire to provide “happiness” while staying under a set budget.
According to a recent poll by Gallup, Americans are planning to spend an average of $752 on gifts this year, with approximately 30 percent of the population spending over $1,000 this holiday season. As this number jumps off the screen, we often forget how easily it is to reach this amount, especially when using a credit card. As I discussed in my credit post, it is often misconceived that if the transaction went through in the store, you have the money to pay off the purchase. While this is often the case, credit is money that borrowed so that you can purchase goods and services when you need them. With this convenience often comes the cost of interest. While credit card interests range greatly, a typical credit card has an interest anywhere between 7 and 36% in the US, depending on the bank’s risk assessment methods and borrower’s credit history (credit score). Therefore, a bill of $752 comes with an interest anywhere between approximately $53 and $271. As a result, it is important to follow a budget.
The first step to sticking to a budget however is to set one. The problem most people face is the uncertainty of what your budget should actually look like. Your holiday budget will typically depend on how much extra money you have after your monthly expenses are covered. Ideally, you should save throughout the year (for example, setting aside $50 a month into a savings account). The amount you save each month however will depend greatly on how much you are actually planning on spending. For instance, only saving $50 a month will leave you approximately $152 short of what the average individual plans on spending for gifts this year. It is import that you take a look at your spending patterns to see where you can cut costs. Some factors to consider are identifying if the expenses are either wants or needs or if you could work more to bring in a little more income for the added expends that arise during the holidays. A helpful way to ensuring that you stay within your budget this year is to follow this three-step process.
- Apply a spending limit
One of the easiest ways to ensure that you stay within your budget this year is to institute a spending limit. One common way of doing this is by setting a limit on how much you spend on each individual or each family member. While you may start to think that it is trivial to only spend, for instance, $10 on each of your cousins. However, f you have 10 cousins to buy for, that quickly adds up!
- Make a gift list
Before you hurry out to the stores to buy gifts for your family and friends, it is important that you make a gift list. While most people make a list, they tend to exclude the price. Therefore, they may at times be fooled by a short list. However, if that list includes new laptops and televisions, you are most likely going to overspend. Therefore, create a list which is separated for each individual listing what you are going to buy and how much each of those items costs. After you complete this list for each individual, tally up the total price and evaluate if you are under your spending limit or not. If over, evaluate what goods are must-haves and which ones you can cross off the list.
- Use the 4 Gift Rule
As the years pass by, there are more and more options as innovations continue to improve. As everyone wants to have the latest gadgets and accessories, it is important to stick to a 4-step examination process in determining whether to buy something or not:
- They want
- They need
- They can wear
- They can read
By using this list, it helps distinguish goods which are “important” or if you are just buying the gift just to have it. In addition, it helps reduce clutter around your home. While there is a lot of pressure to provide a nice holiday experience for everyone, there’s no reason you need to spend an extensive amount of money to do it. By shopping within these four areas, you can set expectations for the holidays going forward, which means less stress year-after-year.
In the end, by sticking to this three-step process, you should be able to reduce your spending while keeping everybody happy. Budgets may seem restrictive, but ultimately, they are tools to help you live a better life when used correctly. The holiday season should not be about worrying about how much you’ve overspent this season. Rather, it should be spent focusing your time and energy on the people you care about and they should appreciate the effort and thought behind your actions.
If you have any questions or would like to know more about how to shop wisely this holiday season, come to our table on Wednesday, November 29, 2017 from 12:00 to 1:00 PM in Beatty Pavilion where our SALT Ambassadors will be available to answer any questions/concerns you might have about budgeting.
Until next time,