(BPT) - By any measure, 2020 has been a difficult year, and many Americans are looking forward to some holiday cheer — even if gatherings are socially distanced. But the holidays can bring anxiety as well as comfort and joy, especially when many families have seen their household incomes decline or are facing job insecurity as a result of the pandemic.
To help you manage your holiday spending and avoid a stressful debt hangover come January, keep the following five tips in mind:
- Review your overall household budget. If your income or expenses have changed significantly this year, now would be a good time to review your household budget to make sure you’re still on track with your short- and long-term financial goals. “The 50-30-20 rule is a good guideline for budgeting,” says Dave Bruni, regional president of Wyoming and South Dakota for First Interstate Bank. “That means allocating 50% of your income to needs, 30% to wants, and 20% to savings or paying off debts. Unless you have special savings already allocated, your holiday spending will likely come out of the ‘wants’ category.”
- Set a holiday budget. Once you have a realistic picture of your overall financial situation, decide how much you can afford to dedicate to the holidays — without raiding your emergency fund or savings set aside for other projects. In addition to budgeting for gifts and cards (and postage to send them), be sure to include travel if you plan to visit family or friends. Next, take note of everyone on your gift-giving list and the dollar amount you want to spend on each.
- Shop thoughtfully. Don’t wait until the last minute to shop, as you’re more likely to overspend if you’re in a hurry. Stick to your budget, and don’t let irresistible sales tempt you into spending more than you planned. Also, think about the kinds of businesses you want to support during these challenging times, and consider spending at least some of your holiday dollars at your favorite local businesses — the ones that give character to your city or neighborhood.
- Use your credit card wisely. If you have trouble paying off your credit card every month, make sure you use a card with a low interest rate, and commit to paying off your holiday balance by a certain date. And, as always, be sure to keep an eye out for unauthorized charges on your account (you can set up spending alerts if you use online or mobile banking), as fraudsters are particularly active during the holidays.
- Consider handmade gifts. For many people, the pandemic has served as an opportunity to reassess priorities — a chance to focus on important personal relationships and maybe spend more time outdoors, while dialing back on consumption. If this has been your experience, or if your budget is particularly tight, consider giving the people on your list simple handmade gifts along with a heartfelt message of appreciation. It really is the thought that counts — this year perhaps more than ever.
Budgeting is never easy. The pandemic has certainly made everything more complicated, but planning ahead and paying attention can help you keep your holiday spending under control so you’re able to start 2021 off on the right financial foot.