A:

Even though holidays and special events arrive sporadically throughout the year, you can still fight the costs associated with these events using a little foresight and some digging into past spending patterns - and, this is where your budget comes in to save the day. The biggest hump to get over is in trying to estimate what will be spent in the current year based on historical precedent and current unique circumstances.

A good place to start building your budget is to go through receipts and bank statements to find out what you spent on gifts, travel, food, decorations and the like in the past year. Assess which are related to annual events and which are of a one-time nature, such as a wedding or graduation party. And don't forget to include those often-forgotten items such as cards, wrapping paper and workplace events - these should be considered tied to the holidays for budgeting purposes as well.

Some budgeting experts maintain that you shouldn't be spending more than 2% per year of your total annual income on holiday gifts. That adds up to $800 for someone who earns $40,000 per year. Setting up a personal guide based on your income level is a responsible idea, and can help towards year-long planning. Many people choose to set up a Christmas club account at their local banking institution; this program allows you to set aside small amounts of money on a regular basis (such as weekly or monthly) beginning in January. The program will sometimes offer a modestly higher interest rate than standard checking or savings accounts because you commit to putting the money away for the majority of the year.

Having your money set aside throughout the year not only eases some of the financial stress of the holidays but could save hundreds in finance charges if it means avoiding credit cards or other consumer debt. You may even find that setting up a total budgeted amount for something like Christmas makes it easier to decide how much to spend to each person on your list.

Making a master list for the holidays also increases the chances that you'll spend wisely. You'll be more likely to comparison shop or find that perfect gift on discount a month or two before the actual holiday.

A big no-no is dipping into credit cards to fund purchases that could be provided for with some proper cash management at different times of the year. Purchases made on credit will incur financing charges that eat into your disposable income. If dipping into credit cards is unavoidable year after year, it's time to make some hard decisions regarding how much is spent during these festive times of the year.

It is inevitable that expenses will come up which you haven't planned for; a budget is only a guidepost. The longer you can spend editing a budget based on the past and your expectations for the future, the more accurate and useful it will become.

To find out more about saving for the holidays, check out Avoid Overspending This Holiday Season and Sneaky Strategies That Fuel Overspending.

RELATED FAQS
  1. Why should I bother creating a budget?

    Creating and using a budget is a valuable tool for all demographics; it's not just for those who need to closely monitor ... Read Answer >>
  2. How does online banking assist with budgeting?

    Setting up online banking can make a personal budget easier to manage through the use of multiple accounts or expense categories ... Read Answer >>
  3. I have 3 credit card debts, how can I get them paid off the cheapest way?

  4. What is the most effective way to write a successful budget?

    Learn the best way to create a successful budget. Learn how to cut unneeded expenses without impacting what you need for ... Read Answer >>
  5. How can I budget for both short-term expenses and long-term goals?

    The first step in planning for long-term goals is actually determining how much you spend on short-term expenses. Once you ... Read Answer >>
  6. When should I use a credit card?

    I am currently taking a personal finance class and my teacher continually tells us not to use credit cards for everyday purchases, ... Read Answer >>
Related Articles
  1. Budgeting

    What Exceeding Your Holiday Budget Really Costs

    And extra $500 may not seem like a lot around the holidays, but what else could that money be going towards, that would help you in the future?
  2. Budgeting

    How to Shop for the Holidays on a Budget

    Holiday shopping doesn't have to cost a lot if you make an effort to save. From setting a budget to comparison shopping, consumers have many ways to save.
  3. Budgeting

    8 Ways to Maximize Your Holiday Budget

    The holidays will only wreck your budget if you let them.
  4. Savings

    Holiday Savings: A Tip a Day Till Christmas

    Start planning and saving for the holiday season, to avoid starting the New Year with a mountain of holiday debt.
  5. Budgeting

    8 Tips To Help You Control Holiday Spending

    These tips will have you singing "Joy to the World" well into the New Year.
  6. Budgeting

    Tips For Avoiding A Holiday Spending Hangover

    You don't have to go into debt to have a happy and memorable holiday season. Use these tips for a bountiful Yuletide on a Scrooge-like budget.
  7. Savings

    How To Be Debt-Free In 2011

    It's hard to think of Christmas when you're busy beating the summer heat, but now is the best time to prepare.
  8. Credit & Loans

    How To Minimize Holiday Debt Before It Happens

    Holiday expenses can drown you in debt. Find out how to avoid this festive spending hangover.
  9. Budgeting

    The Complete Guide To Planning A Yearly Budget - Creating A Yearly Budget

    There are a number of ways that you can approach a yearly budget. Some may prefer to add up all income for the year and all expenses for the year, and divide each category by 12 to come up with ...
  10. Budgeting

    5 Reasons Why You Can't Stick To Your Budget

    You want to stay on track with your finances, but these fatal budgeting flaws may be holding you back.
RELATED TERMS
  1. Personal Spending Plan

    Similar to a budget, a personal spending plan helps outline where ...
  2. Budget

    An estimation of the revenue and expenses over a specified future ...
  3. Federal Budget

    The federal budget is an itemized plan for the annual public ...
  4. Single's Day

    Singles' Day is a holiday celebrated in China on November 11. ...
  5. Tax Holiday

    A government incentive program that offers a tax reduction or ...
  6. Cash Budget

    An estimation of the cash inflows and outflows for a business ...
Trading Center