If you can hear the cha-ching of the cash registers and Christmas music jingles already, you know what that means -- holiday spending is upon us.
Anticipation and enticing deals can make you throw down money like eggnog around the holidays, but it's important that you budget for Christmas so you're not getting wrapped up in debt.
Read on to find out how to plan for the holidays and buy Christmas gifts on a budget.
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How to make a holiday budget
Although it's the season for giving, it doesn't mean you should exceed what you can truly afford. According to Kirk Jewell, a certified financial planner (CFP) and founder of Global Financial Services, "a good rule of thumb is to spend no more than 1 percent of your overall income on the holidays." So, if your combined household earnings are $150,000, no more than $1,500 should be spent on your holiday budget.
Look at your discretionary income
How do you make a Christmas budget exactly? Assuming you're already working off a monthly budget -- if not, do it now -- take all household expenses and savings into account, and see what free money is left, said consumer and money-saving expert Andrea Woroch. "You may decide to cut back on certain extras or luxuries to increase this budget, like going out to eat or your once-a-month manicure," she said.
Also, if you save up for Christmas 2015 now, you'll be able to beef up your holiday budget, according to April Lewis-Parks, director of education and public relations for ConsolidatedCredit.org. Why? Because the more time you have, the more pay cycles there will be for you to pull in discretionary cash instead of using credit.
Use a holiday budget calculator
If you want to make a stellar effort to buy Christmas gifts on a budget, a holiday budget calculator can help keep your spending in check. "Setting up a service like Mint to track spending and having categories like 'holiday gifts,' 'holiday food' and more can help you keep on top of what you're spending as you go," said Kelly Whalen, founder of the money-saving blog, The Centsible Life.
If you're looking for a quick breakdown, the Better Business Bureau and Clearpoint Credit Counseling Solutions offer a holiday budget calculator based upon your income. For example, if your gross annual income is $50,000, the calculator will give you a recommended holiday budget of 1.5 percent of your annual income. From there, you can allocate how much you want to spend on gifts, holiday parties, travel and more.
Make a list, and check it twice
Santa shouldn't be the only one making a "naughty and nice" list. Now that you know how much money you can budget for Christmas, it's time to plan how that money should be spent.
According to Teri Gault, founder of TheGroceryGame.com, a couponing website, you should write out all the people you plan to buy gifts for, plus two more. "Why two more? Because there's always a few people you forgot about, and that will bust your budget," she said. And if you don't end up buying for those two anonymous people -- great! That's more savings for you.
Also, don't forget to set a limit for each person on your list. "It's easy to try to equal or give a better gift than your friend or family member," said David Hardin, president of Hardin Financial Group. "Don't fall into that trap."
Of course, a budget for Christmas doesn't mean just gift recipients. Budget for these items as well:
- Cards, postage and shipping
- Entertainment, including food and drinks
- Year-end tips for service providers
- Travel costs if you're going out of town for the holidays
Review last year’s spending list
Create your budget for Christmas 2015 by looking for ways to cut spending based on last year's damage, said Lidia Shong, a personal financial writer at aboutLife.com, which provides free online financial planning services.
"If you spent $60 on a sweater for Uncle Bob, and his first reaction was to tell you he really needed socks instead, buy him socks this year," said Shong. That's money saved, even if Uncle Bob still has something different to say.
Schedule shopping, and use cash
Eliminate last-minute shopping splurges by putting your shopping dates on the calendar. Also, bring cash so that you don't exceed your holiday budget. "Shop with cash or buy gift cards for the stores you plan to shop at with a specific limit you want to spend, then leave your credit cards behind," said Woroch. "This way, you can't spend more than you budgeted for."
If you really want to stretch your dollar, Woroch also said to buy gift cards at a discount through sites like GiftCardGranny.com or CardPool.com. These sites can offer anywhere from 3 percent to about 25 percent off at department stores, restaurants and more.
3 signs you’ve exceeded your holiday budget
If you really enjoy holiday shopping and planning but tend to get carried away, you might find yourself dealing with post-holiday regret -- and debt. But, you can avoid going over budget if you keep an eye out for these three signs:
1. You're dipping into your savings
According to Jewell, you should never dip into savings. After all, the key to savings is to not touch it. Christmas shopping or not, don't touch your hard-earned savings.
2. You don't really know what you're shopping for
"If you find yourself at a Black Friday sale at a department store at 4 a.m. looking for gifts without a specific list of what you intend to buy, you have already fallen deep inside the holiday overspending hole," said Hardin. "Pull yourself out, and regroup before you purchase one more gift."
3. You find yourself considering credit card deals
"Stay away from the trap the department stores lure you into," said Hardin. One of the traps he's referring to could be store credit cards. During the holidays, a retailer might try to convince you to open a store credit card by offering a discount on your purchase. But, ask yourself if it's really worth it. After all, you don't want to be stuck paying a store credit card bill for holidays to come.