Your Holiday Budgeting Questions Answered


We asked Certified Financial Planner, Director and Southeast Division Sales Performance Manager for Merrill Edge Tracy Cooper ways you can plan for holiday spending.
Here are some ways you can get through holiday shopping without breaking the bank.
1. What is the number one mistake people make when holiday shopping?
Neglecting to plan ahead or establish a holiday budget early has the potential to derail any good financial behaviors you’ve instilled and followed throughout the year.
Shoppers also sometimes dip into other funds, such as an emergency fund, or they rely too heavily on high-interest credit cards, instead of planning and budgeting properly.
When it comes to holiday shopping, it’s likely you will need to save for a large purchase or several purchases at once. Before you purchase these gifts, it’s important to estimate how much money you will need for a specific item so you can best establish your budget. Although prices may vary over time, you should be able to make a good estimate based on comparable items in advance.
2. What is the best way to avoid overspending on holiday gifts or parties?
To avoid overspending over the holidays, consider using credit cards wisely, setting spending goals and thinking outside of the box when it comes to gifts:
1. Use Credit Cards Wisely – Use plastic carefully when holiday shopping by finding the right balance between using cash and credit. Keep your financial future bright by paying off holiday purchases right away, rather than carrying a balance and going into debt.
2. Set Spending Goals – Outline a specific spending goal for the holiday season and stick to it. Then, make a plan to pay off holiday purchases in a short amount of time. Merrill Edge or can be great resources for people who need guidance or tools to set and stick with financial goals.
3. Think Outside the Box – Consider giving a gift that can’t be wrapped, but rather makes a difference in the future. For example, family members may want to consider putting money towards a child’s education via a Section 529 plan, or making a charitable donation in the recipient’s name.
4. Prevent Impulse Buying – Do your best to prevent any impulse purchases or automatically paying full price. Make a list of gifts you’re planning to buy and use it as a checklist to keep track of your purchases and budget. Search online for discounts that can be printed ahead of time, or consider doing a quick search on a smartphone or table for coupons while waiting in line to check out.
5. Even with the holidays right around the corner, it is still possible to “find money” if you are looking for extra funds. Consider taking a closer look at spending habits in the short term, as these items can add up to a great deal more than you might realize, including take-out costs for food and coffee, entertainment purchases and extraneous subscription services.
3. Is there a magic number or formula people should use when purchasing gifts?
As noted earlier, estimating the amount of money you will need to purchase gifts can help you determine how much you should aim to save.
In the hustle and bustle of the holidays, it’s not uncommon to lose sight of how our seemingly small everyday actions — or inactions — can impact our budget. As a result, we may end up borrowing or spending too much over long periods of time, which is why it is important to create and stick to a budget.
4. Why is planning for holiday spending important?
Planning for holiday spending is important, as many don’t consider what holiday spending does to your bottom line, beyond just a couple of months. By cutting back, think about what can be done with the extra funds, such as investing for retirement or contributing towards a down payment on your dream home.
While no one is immune from making a few financial mistakes in life, many of these mistakes can potentially be avoided or minimized as long as you pay attention to what your money is doing now and your plan for the long haul— especially during the holidays.
If you’re unsure how to establish a budget or start saving, consider involving a professional who can help you pursue your long and short-term financial goals, as well as plan ahead for big purchases.