Friday, December 3, 2021

They call it the most wonderful time of the year for a reason! The holidays are for reconnecting with loved ones, celebrating the beauty of the season and gathering to enjoy holiday treats. However, when it comes to gift giving and other holiday-related expenses, the holidays can be a major source of financial stress for some.

Between the purchasing of presents, unexpected costs associated with holiday parties and the multitude of social events, it can seem impossible to save during one of the most expensive times of the year.

While spending money during the holidays should never be necessary, we understand that everyone wants to be able to balance their financial goals with their holiday spending.

Luckily, it is very possible to stay on track during the holidays. You just need to be strict with your budget, realistic with your holiday expenses and willing to plan ahead for those unexpected costs that tend to creep up.

Here are our top tips on how you can still save money during the holidays:

1. Set a strict budget ahead of time

Carefully planning out exactly what you will buy for each person on your shopping list and setting a strict budget for each item is critical to ensuring you don’t overspend.

Shopping without a plan could mean losing track of how much you have spent in a short period of time, not leaving enough money for monthly expenses or dipping into your emergency savings.

Instead of leaving your spending to chance, set your budget well before the holidays and make sure you keep yourself accountable. If you tend to overspend beyond a set budget, try taking out cash and leave your cards at home. This is a simple and effective method to keep your spending in check while removing any possible temptations of spending above your limits.

2. Keep your automatic transfers on

With all of the spending that takes place around the holidays, many people tend to assume they can’t save any extra cash. As a precaution, they may turn off their automatic transfers to their savings accounts to ensure they have enough cash for holiday spending — but this may be an unnecessary precaution.

Make sure you crunch the numbers ahead of time, and if there is room in your budget to keep your automatic transfers on, then do not turn them off. If you know you can’t save at the same rate as other times of the year, then simply lower your automatic transfer to a more manageable amount. You may not save as much for a month or two, but it’s better to tuck some money aside than nothing at all.

Once the holidays are over, we recommend setting a notification on your phone, computer or even making a note on your calendar to increase your automatic transfers back to their regular contribution amount.

3. Use debit over credit

As online shopping for the holidays continues to grow in popularity (thanks Black Friday and Cyber Monday sales!) it’s becoming easier than ever before to charge all of your holiday spending to your credit card. While this can alleviate the movement of cash out of your chequing account for the short-term, this can lead to a shockingly high credit card bill 30 days later.

Last year, one quarter of respondents to an online survey reported they spent more than they intended to over the holidays. 16% of those same respondents also estimated they likely wouldn’t be able to pay off their credit card debt from the holidays for at least two more months.

This is incredibly costly, as the monthly interest and ongoing expenses will continue to increase the debt owed. With time, it will only get harder to pay off and your credit score may drop.

To avoid this, we recommend using your debit card as much as possible. If you must make a purchase with credit, pay it off immediately before additional expenses come up.

4. Remember that it’s okay to say “no”

We understand that FOMO (fear of missing out) around the holidays can be real. We want to be able to see everyone, give a gift wherever we go and pay for that extra bottle of champagne — but we don’t have to do it all.

If it’s all becoming too much, your budget is at its limit and money is flying out of your bank account faster than it’s coming in, it’s time to call it quits.

There is nothing wrong with politely declining extra expenses and letting those in your life know that you’re on a strict budget this year. Everyone will understand and if anything, they may be relieved as they are probably hoping to save a bit more cash this time of year too.

Having open and honest money conversations with those in your life around the holidays is an important step to staying on budget and keeping more money in your savings account.

5. For next year, start shopping as early as possible

Spending is very much attached to psychology. There is something about shopping with the holiday music blasting above you, the glistening lights in the storefronts and the hustle and bustle of the other shoppers that make you more likely to overspend.

To keep a level head, we recommend hitting the stores as early as possible to avoid crowds and the temptation of going overboard.

Starting early can also mean capitalizing on some end of season sales and snagging the must-have items before supply drops and prices start rising.

6. Track your spending this year to help plan for next year

If you want to get a head start on your holiday finances for next year, we recommend tracking all of your spending this year and dividing the total by 11. Whatever your resulting calculation comes to, we recommend setting up a special holiday savings account and automatically transferring that total into your holiday account each month until the end of next year. This is a simple and effective method to ensure you have enough saved by the time the holidays roll around next year.

Despite all of these tips, it’s important to remember the holidays are about so much more than gift-giving. They are a time to reconnect, spend time with those you love and make memories that will last a lifetime.

We encourage everyone to focus on the true reason for the season and look beyond materialistic traditions when it comes to celebrating the holidays. Making a handmade card, baking a special treat or simply sharing your time with others are the best ways to connect and spread joy this season.

For those who want to balance their budgeting goals while giving gifts this season, it is very possible to save your money, so long as you keep a level head and are realistic about what you can or can’t afford.

YNCUniversity is here for all your financial literacy needs. Need one-on-one help? We got you! Reach out to our advisors HERE.

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