Avoid a Debt Hangover with a Holiday Budget

The holidays are right around the corner — that time of year when overindulgence and overspending become the norm for so many families. Creating and sticking to a holiday budget is a key defense for avoiding additional debt in the New Year.

Considering that less than 50% of people actually set up a holiday budget let alone adhere to it, it’s no wonder that the average consumer ends up with more than $1,000 in credit card debt from holiday spending.^{1, 2}

With some preparation and planning, however, you can defend against the dreaded debt hangover and ring in 2018 with a healthy financial forecast.

Here are some recommendations for creating a holiday budget:

• Make a list of expenses. Begin by making a list of what you will need to make it through the holidays without using credit or drawing from your emergency fund. List all the supplies you’ll need. Don’t just include the names of people and gifts you need to buy. Will you need gift-wrapping supplies? Will you be traveling? Be sure to account for gas and miscellaneous expenses. Are you hosting a dinner or party? List the food and drinks you’ll need for these get-togethers – anything that goes beyond your usual grocery list.
• Estimate the cost of expenses and prioritize. Using your list, determine how much money you’ll need to cover the cost of your holiday expenses. Record these figures on a spreadsheet or a piece of paper and add the totals up. If that total shocks you or is not doable, it’s time to prioritize and get creative.
• Start a holiday fund. Once you’ve arrived at a total holiday budget that’s acceptable to you, start putting away an amount from each paycheck to go into a holiday fund to give you some cushion when December rolls around. Depending on when you start, how much you put into it, and how resourceful you are, you could fund your entire holiday season this way.

1 TheMotleyFool, “Here’s What the Average American Spends on Holiday Gifts,” December 1, 2016

2 MagnifyMoney.com, “Americans with Holiday Debt Added $1,003 on Average This Year,” December 29, 2016

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