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How to Build a Humbug-Free Holiday Budget

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Build a humbug-free holiday budget

‘Tis the season to be jolly, but for many of us, current inflation rates are having a huge impact on holiday spending and gifting. We may call it the “most wonderful time of the year”, but with each passing season, our celebratory feasts, gifts, travel, and soirees get a little more expensive. In fact, according to the National Retail Federation, Americans collectively spent $936.6 billion last year on November and December holidays—that’s nearly double what was spent just 15 years ago ($501.5 billion in 2008). For the average American, that equates to almost $1,000 in expenses for the 2023 holiday season. Fortunately, it is possible to enjoy the merriment without going deeper into debt. How? By setting up a holiday budget—and then, of course, sticking to your plans.

How to Build a Holiday Budget

Set a spending limit. It’s easy to get caught up in the spirit of the season only to be swamped with post-holiday bills. Save yourself the headache and stress by setting a budget and sticking to it. Take stock of your current finances and consider what you spent the previous year. Make a list of essential holiday-related expenses. Setting a budget in advance will help you be mindful of how much money you can devote to each category of expenses, including gifts, food, travel, entertainment, and other holiday cheer.

Get a handle on existing debt. If you are already carrying some debt and then overspend on gifts, the results can be devastating to your financial well-being. Cut back on spending before you begin racking up new debts and, if you can, consolidate your high-interest debts into a single, low-APR loan or credit card.

Prioritize where your money is going. Before you dive deep into holiday spending, consider how to spend most efficiently. For example, if you have a Maps loan in good standing, you can free up some holiday cash by taking advantage of our Skip-a-Payment opportunity in November or December. This can be especially helpful for paying down high-interest debts or freeing up space on your credit cards. Of course, keep in mind that while you’re taking a break from your regular payment, interest will continue to accrue on your loan balance and your skipped payment will be added to the end of your term, extending your final loan payment date.

Be mindful of credit card spending. Credit cards are valuable tools for tackling holiday expenses, but they also make it easy to overspend. Map out how much debt you are already carrying and how much you can afford to pay once the hustle and bustle of the season has ended. Also, be aware of how your holiday spending might impact your total debt-to-credit (credit utilization) rate—which most lenders recommend you keep below 30 percent. Set a hard limit on the amount of credit you’ll use throughout the season and be vigilant about not spending more than you can realistically pay back.

Think priceless, not pricey. The best gifts aren’t always the most expensive gifts. In fact, a strict budget can be a blessing in disguise because it forces you to think about what is most important. Give the gift of your time and creativity. Make homemade gifts. Even if you aren’t particularly crafty, it is possible to give something special and meaningful without spending very much. Above all, be clear with your friends and family members about your budget. Careful planning and honest conversations can help reduce costs and keep the holiday season from ruining your finances.

Plan early for travel. If you are one of the millions of Americans who expect to travel this holiday season, pack your patience and plan ahead. In 2022, nearly 113 million of us traveled over the holidays and—if predictions prove right—even more will travel in November and December of 2023. The cost of booking flights, rental cars, and lodging tends to surge as the end of the year approaches, so book early and watch for deals through credit card perks, AAA, or other such options.

Protect your personal data. Nothing can put a hitch in your holiday plans like cyber theft or credit card fraud. Not only could you lose precious holiday funds, fraud can also hurt your credit score and cause unnecessary bills and stress. Fortunately, there are some simple steps you can take to protect yourself. Stay on the lookout for email, phishing, and in-store scams. The holiday season is a high time for fraud. Use your credit card (instead of your debit card) for online purchases and monitor your credit closely. Sign up for fraud alerts with your credit holders and consider putting a freeze on your credit report. This will prevent thieves (and yourself) from opening new accounts in your name. When you are ready, you can unfreeze your credit in a matter of minutes. 

Lastly, if you always find that you are a little short when the holiday season comes around, consider opening a Christmas Club account. You can set aside a fixed amount each month and you’ll earn 0.02% APY on your savings. Our Christmas Club is designed to help you save for holiday gifts, property taxes, insurance, and other year-end expenses. Set up a direct deposit or choose an amount to transfer each month and the funds you save will be automatically distributed on November 1. To set yourself up for success next year, calculate what you spend each holiday season and divide that number by 10. The new number is the amount you should set aside each month. Come November 2024, your holiday season will be fully funded, and you can savor the experience instead of feeling stretched thin.

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