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Preparing your Holiday Budget

The holiday season is a time for happiness and enjoying moments with your loved ones. However, it can also be a very expensive time of year. The presents, clothing, decorations, dinners, parties, and everything else can certainly add up quickly. The result can be a nasty credit card bill when it’s all over. Holiday overspending can potentially even lead to serious debt problems that can significantly affect your life for a very long time.

The key to avoiding holiday debt is to make a budget and stick to it. Here are some tips for putting together your holiday budget as well as some tactics that will help you stay on budget all through the holiday season.

Figure Out How Much You Can Spend

The first step in creating a holiday budget is figuring out how much money you can afford to spend. If you’ve been putting money aside for holiday savings throughout the year, it will probably be pretty easy to know how much you have available.

If you haven’t, you’ll need to look at your existing budget and determine what you could earmark for the holidays. You may want to consider cutting your spending in other areas so that you have money for the holidays. Whether you wish to do this will depend on your financial situation and how much you importance you place on holiday spending.

Estimate Costs

Once you know how much you have available to spend, the next step is to list all of your possible expenses. Think about what you’d like to buy in terms of gifts, food, decorations, clothing, holiday activities, etc. Be as specific as you can and list everything you may want. Then, once you know what you’d like to buy, write down estimated prices for each item. If you’re unsure, overestimate slightly so you have some wiggle room. If you have your receipts or bills from last year, use this information to help you.

You may want to add an “other” category just in case you’ve forgotten something, or to help you deal with a new expense that could pop up after you’ve made your budget.

Set Priorities

Certain expenses will be more important to you than others. For instance, you may want to prioritize buying gifts for your loved ones over everything else. This is a very personal decision. Someone else may choose to focus on food and decorations for a holiday dinner, for example.

Rank the items on the list from the most important to the least important.

Make it Balance

You may not be able to afford everything on your list. That’s okay. Most people don’t have an unlimited budget. Compare how much you have available with how much you’d like to spend. Does it balance? If you’re able to afford everything on your list with the money you have, good for you! However, if you’re not, you’ll need to make some cuts.

These cuts are why your prioritized your spending earlier. When it comes time to cut, start by reducing or eliminating those expenses that are at the bottom of your priorities list and keep going until your budget balances. You may need to adjust your expected spending in some categories so that the numbers work out.

If you still can’t manage to make the numbers balance, think of if there’s anything you can do to earn some extra money. For example, you may want to work some overtime if that’s possible, or you could consider selling items you already own so that you can afford the things that really matter to you.

Track Your Spending

One of the most important things you can do to keep yourself on budget is to track your spending. Whether you do it with a pen and paper, a spreadsheet, or an app, it’s important to record how much you spend and compare it to your estimated costs. This will allow you to see how your budget is going and catch yourself if you’re in a position where you’re spending more than you thought you would. You can then modify the rest of your budget to make sure that you don’t overspend.

Remember What Truly Matters

Almost everyone likes to spend money over the holidays, but it’s important to remember that this time of year isn’t about how much you money spend, but that it’s about who you spend your time with. There are many memorable ways to have a happy holiday season without going into debt. It’s much better to spend less over the holidays and avoid debt than to end up in serious financial trouble that could take you years to solve.