November 19, 2018 – By Kristin Stoller
’Tis the season for increased spending. Before you start your holiday festivities, make sure you have a rock-solid holiday budget. T
This year, the National Retail Federation predicts that the holidays will be the most expensive event of the year for the average American, costing about $1,007 per person.
If that’s way higher than what you can afford, it’s imperative that you make a budget before you start shopping—and stick to it. And like the well-known Christmas song goes, you’ll need to start by making a list (and checking it twice).
Brainstorm Your Gift List
Before you even begin to make your gift list, there’s one essential question you need to ask yourself: Do you really need to give a gift?
“We tend to default toward gift giving. A lot of the times, we don’t even need to,” says Jesse Mecham, founder and CEO of budgeting app You Need A Budget. “I have a situation where you almost feel this obligation to give a gift, and if both people made the step to say, ‘Hey, let’s not,’ it would work out just fine.”
Once you decide who you want to give to, put pencil to paper. First, decide how much you can comfortably afford to spend this holiday season—and stick to that number. Then spend quality time thinking about what to get each person on your list. Beware of everyone’s favorite backup plan: the dreaded mall window shop.
“The last thing you want to do is say, ‘I have these people on my list and I don’t know what to get them, so I’ll go to the mall or Amazon and browse until the right item speaks to me,’” Mecham says. “One, the quality of gift is likely to drop. But you will also be more prone to impulses.”
And if you have to go to the mall, don’t be distracted by sales or bargains. You don’t need every cute, inexpensive item. If it wasn’t already on your list, you’re not saving money, you’re spending extra, says Rachel Kampersal, marketing communications and programs associate at nonprofit American Consumer Credit Counseling.
In the same vein, Kampersal suggests avoiding last-minute shopping, as it may result in impulse buys or purchasing items you simply don’t need. This can destroy your budget. If you know you have a tendency to overspend or impulse shop, don’t rely on credit cards, she says. The consequences of mindless swiping will catch up to you come January.
Factor in Other Expenses
Gifts aren’t the only extra expense you have during the holiday season. The season is rife with holiday parties, many requiring additional funds. Whether it’s new clothes for the office holiday party or additional food and drinks for a party you are hosting, you’ll need to factor these figures into your budget ahead of time.
An increase in downtime or time off from work can also lead to increased spending on entertainment. Decide ahead of time how much you can afford to spend on that Broadway show or adorable photos of your kids with Santa. And if you can’t afford it, find a cheaper alternative.
Arguably, one of the largest items you’ll need to budget for is travel. Budget more than you need for your plane, bus or train ticket—and remember to add extra if you need lodging.
But there are some ways to game the system. According to Sam Shank, CEO of mobile and online booking app HotelTonight, the week before Christmas is the cheapest week of the year for hotel bookings. And there are more rooms available than you’d expect for New Year’s Eve, with cancellations and no business travelers, he says.
Saving for the holidays shouldn’t start in November. Mecham maintains that you should start saving for Christmas on January 1 of that year. He recommends creating a “Christmas bill” in January. Each month, you should set aside one-twelfth of what you want to spend on Christmas that year and put it into a savings account, he says, preferably one with high interest.
Since things generally get more lavish around the holidays, Dave Nugent, chief investment officer of robo-advisor Wealthsimple, advises to take it easy for the months before and during the holiday season. Rely more on homemade meals, skip a coffee run every now and then, and if there are monthly subscriptions that you pay for and you might not need, cancel those for now to save the extra cash, he says.
Typically, the holiday season brings holiday bonuses. Instead of blowing the entire amount, spend only about 15% to 20% of it and use the rest responsibly, whether that means paying off any high-interest debt, establishing a strong emergency fund or starting an investment portfolio, says Nugent.
If you need an extra boost to help you stick to your budget, pick up extra shifts at work or get a side-hustle for the holiday season, Kampersal says. And if you are really struggling to make your budget work, consider using monetary gifts you’ve received (cash, check, etc.) to dig yourself out of the hole, she says.
Get Your Rebates
So you took the advice listed above, but you’ve still slightly overspent on this holiday season. Fear not, there are still some chances to get money back.
If you saved your receipts, download a rebate app like Ibotta. It enables users to add cash-back offers to their profile and then scan their receipts to collect money. Ibotta works at over 300 retailers, including most grocery stores, liquor stores and retail stores like Sears or Home Depot. However, you’ll only be able to cash out your earnings (either through Venmo, PayPal or gift cards) once you reach $20 in rebates.
Mobile and desktop product Paribus, now owned by Capital One, also offers users a chance to get a holiday refund for online purchases. Users are asked to sign up using their email and grant the app permission to scan their emails for receipts from major retailers, such as Amazon, Walmart, Target and Macy’s. Paribus then watches for price drops in the items you buy. Once the price drops, the app works with the retailer to refund the difference to your original form of payment.
In 2017, Paribus saw the biggest price drops for online purchases in jewelry, kitchen appliances, electronics, luxury clothing and furniture, says Jenna Kaye-Kauderer, head of Paribus at Capital One.
“One product that had the most frequent price drops based on the savings we found was the Keurig K-Compact single-serve coffee maker. That had an average of just under $15 in savings,” she says. “That can be pretty sizable if you are saving on multiple items.”
Last year, Kaye-Kauderer says, Paribus found over $3.7 million in potential savings on items purchased online during the holiday season.