By Andrew Housser
It's holiday season, and despite the fact that snow has begun to fall and warm weather is a distant memory in some parts of the country, many people are ill prepared for the expenses that can accompany the season's festive celebrations. Before you head to the shopping malls or online stores, take a moment to make a budget for the holidays.
1) Estimate your baseline.
From mid-November, six weeks remain to scrimp and save for the holidays. If you are a planner, you might have a savings account dedicated to holiday savings that you started last year. If you are like most people, however, you have not done that. The average holiday expenditure in 2011 will be $704 per person, according to the National Retail Federation. How much will you have available? Be sure you can give gifts without vaporizing your emergency fund or going into credit card debt.
2) Make a list of gift recipients.
List the gifts you will give this year. Remember your relatives and close friends, as well as gifts you customarily give to teachers, doctors, neighbors or others close to your family. Also include year-end tips for newspaper carriers, babysitters, housecleaners, hairdressers and other service providers. If you frequently make charitable donations at the end of the year, include those, too. You might be surprised how many people (and organizations) are on your list!
3) Add up gift spending.
Next, assign a dollar amount to each recipient. Tip: Many frugal holiday gift-givers simplify their budget by assigning a dollar amount, rather than a certain gift, to each recipient. Then they challenge themselves to shop for bargains to give the nicest gift that fits within their budget.
4) Tally other holiday costs.
If you purchase holiday cards and postage, holiday portraits, decorations, food and drink, special outfits, or need extra child care to attend holiday events, estimate those expenses.
5) Total your travel costs for the holidays.
Add up airfare, taxis, hotels, gasoline for road trips, meals out, entertainment, or whatever you require for a visit to friends or relatives at the holidays. If family or friends are coming to you, remember to include the cost of extra food or out-of-the-ordinary outings with guests.
6) Check your grand total.
Add up the total spending expectations you outlined in Nos. 3-5, above. Is the number greater than your total available funds in No. 1? If not, consider ways to bring your budget in line. Can you find extra seasonal work to make additional money? Will you work overtime?
7) Trim gift spending.
Brainstorm ways to reduce spending. Can you trade child care to save on babysitting? Can you stay with a relative instead of in a hotel? Can you make smaller gifts (perhaps a warm note, possibly accompanied with a token, such as a $5 gift card to a coffee shop or bookstore, or baked goods) for teachers, hairdressers and others, to remain within your budget while expressing your appreciation? Can you draw names for a family gift exchange instead of giving individual gifts?
8) Consider affordable experiences.
Tickets to big-budget holiday plays or ballets can cost $50 or more. Try a community production of instead of going to a big theater downtown. Invite others along to build a fun memory in lieu of giving gifts.
9) Collaborate to cut the costs of your holiday menu.
Host a potluck holiday meal. Try an online tool like www.signupgenius.com to delegate items and keep track of who is bringing what.
With some advance planning and creative thinking, you can bring your holiday budget in line. When you work from a budget, your holidays can be far more carefree. Ultimately, you will be able to focus on joy and fun at the holidays, rather than worrying about the bills that come tumbling in afterward when you overspend.
We have to make a list, and check it twice to make sure spending is kept under control. (©VStock/Thinkstock)
Andrew Housser is a co-founder and CEO of Bills.com, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC providing comprehensive consumer credit advocacy and debt relief services. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.
