Many people start every new year in debt because they overspend during the holidays. Understandably, we want to shower ourselves and our loved ones with gifts. But we must be careful to create and stick to a holiday budget to avoid going into unnecessary debt.
If you want to splurge during the holiday season, you can start saving months before. This savings effort will allow you to pay for gifts with cash rather than credit cards. Keep reading to learn the best savings tips to help you plan a successful 2022 holiday budget.
How to Create a 2022 Holiday Budget
The process of setting a successful holiday budget is like setting a household budget. First, you have an idea of how much you spent in previous years. You should then establish how much you can realistically spend in the upcoming holiday season.
Finally, you need to track how much you spend on holiday items to ensure that you stay within budget. Read on for the exact steps you should follow to prevent future holiday budget disasters.
Set Aside Time to Plan and Budget
You may have lost control of your 2021 holiday budget because you didn’t set aside time to create and track your budget. Having a budgeting plan that you refer to throughout the year and during the holidays will ensure that you have money for the things you need. In addition, tracking your spending and sticking to your holiday budget plan will help you avoid debt and bankruptcy.
Calculate How Much You Typical Spend Every Holiday Year
The next step in planning a successful 2022 holiday budget is establishing exactly how much you spent in previous years. Start with 2021 since you’ll be able to recall most of your spending and may still have access to financial information from that period. So grab all your bank statements, credit card statements, and cash receipts, and set aside at least an hour to go through all the information.
Use a spreadsheet to list all the items that you spent money on. Then, analyze whether all the spending was necessary and if there are some ways you can save some money during this year’s holiday. For example, perhaps hotel stays ended up costing more because you booked them last minute.
Maybe you could have saved on some holiday gifts and decorations if you bought them during post-season and preseason sales. However, expedited shipping costs are also high, so buying gifts late may have cost extra money.
To get a clearer picture of your annual holiday spending, you can also check November and December bank account and credit card statements from previous years. They will give you a general idea of how much you spend every holiday.
Set a Financial Goal for the 2022 Holidays
Now that you know your estimated holiday spending from previous years, you can come up with a realistic estimate of how much you plan to spend for your 2022 holidays. Start by listing all your desires and how much you expect they’ll cost. Then, gather your whole family when creating your holiday wish list.
Add travel plans, hotel bookings, gift purchases, and party budgets. Don’t forget to spend some money on yourself too. You’ll deserve a reward for working hard in 2022.
Once you have listed all your desired holiday expenses you can add them to determine your holiday budget. Is the figure something you can afford or something you can easily save for in the next 11 months? If yes, that can be your budget plan for the 2022 holiday.
But if the total figure is beyond your reach, you may need to cut out some of your planned expenses. It’ll be cheaper and less stressful to save up for your planned holiday activities rather than paying for them with credit.
Plan For Discretionary Expenses and Emergencies
Once you create your budget, remember to add 10-20% of your final figure for unplanned expenses. For example, you never know if you’ll have a holiday emergency, or you may have to pay for an unexpected dinner party or gift.
If your budget is tight and inflexible, these types of surprises could throw you off your budget. This is why it’s essential to plan for the unexpected by slightly inflating your final budget.
Don’t Forget to Pay Off Any Debts
As you plan your holiday budget, don’t forget to have a budget to pay off any high-interest debts and loans. You may have gone into credit card or “buy now, pay later” debt during the 2021 holiday season. Try and pay off those credit card balances in full as soon as possible.
Reduce Your Monthly Expenses to Save More for the Holidays
If you want to have more money for your 2022 holiday plans, you could find ways to reduce your monthly expenses to save more. For example, you can cancel your gym membership and do at-home workouts or cook more meals at home. Every little bit you save each month will help you have a happier holiday in 2022.
Increase Your Income
Another way to save more for your holiday budget this year is to increase your monthly income. For example, ask for a raise at work, work extra hours, or get a second job or side-hustle business. All this can add some additional funds to your holiday savings account.
Track Your Holiday Savings and Spending
Like other budgets, your holiday budget will only succeed if you track your income expenses. Check your savings weekly or monthly to ensure that you are on track to save enough for your holiday budget. You should also track anything that you spend on holiday items.
Let’s say early in the year you notice a deal on a gift you want to buy for someone. The money you spend on the gift should come out of your 2022 holiday budget. Once the holiday season kicks in, you may need to track your spending daily to ensure that you don’t exceed your budget.
Another great tip is to have a separate account for your holiday expenses. Then, once the funds in that account run out, you know that your holiday spending is over.
Technological advances have provided us with tons of budget tracking apps and tools. Besides using a pen and paper to track your spending, you can use a spreadsheet or choose from many different smartphone apps. The important thing is to choose an easy and convenient tool to use to develop a tracking habit.
How to Save for the 2022 Holiday Season
If your holiday budget in 2021 went up in smoke, the best thing you can do is learn from your best mistakes and do better this year. You now have 11 months to save for the 2022 holiday season.
How should you go about it? Below are our best savings tips for 2022.
Pay Yourself First
The first smart tip for saving for the 2022 holiday season is to pay yourself first. The first expense from any income you receive should be a payment to your savings accounts. In addition, you should have a retirement savings account and an emergency fund in place before you start saving for your holiday.
Open a Savings Account for Your Holiday Budget
One way to ensure that you save for your 2022 holiday budget is to open a savings account specifically for the holidays. Set up automated payments from your income to go into the savings accounts so that you don’t forget to save.
For instance, you may get your salary on the 30th of each month. You can set an automated payment on the 2nd from your salary account for the amount you budgeted to save each month.
Adopt a Frugal and Minimalist Life
To save more for the 2022 holidays, you may need to change your current lifestyle to keep more. Becoming a minimalist will simplify your life and save you a lot of money.
Go through your home and get rid of everything you no longer use. This exercise will help you question future purchases, so you only buy items you need. A clutter-free home will be easier to clean and maintain and help you gain peace of mind.
Look for deals, compare prices, and use coupons whenever you shop. Also, take advantage of any reward schemes and cashback schemes that stores offer. Any money you save will go into your holiday budget, so be militant about cutting expenses.
Join a Credit Union
Join a credit union so that you can have at least one of your savings accounts with them. In addition, credit unions act in the best interests of their members, so their interest rates are often higher than other financial institutions.
They also provide a lot of free financial advice that could help you. For instance, if you’re in debt, they could give you options on the best way out. They could also provide you with investment advice if you plan for retirement.
Start Creating a Successful 2022 Holiday Budget Today
In 2022, choose to spend within your budget and refuse to be overtaken by the spirit of overspending. For example, setting and sticking to a holiday budget can prevent you from starting 2023 in debt.
Also, start saving now for the holiday season, and you will have more than enough to spend on your loved ones during this year’s holidays. For more information and tips on budgeting, read the rest of our blog.