The Holiday Budget

I think it is important to keep a budget for yourself and/or your household all year round, but it becomes especially important around the holidays when everyone's expenses balloon. You don't want to wind up bleary eyed on the other side of the season with a mountain of debt you have no way of paying off. Having a budget doesn't have to be some awful experience that ruins the holidays and your gift giving; it just means you spend money smarter. All it takes is a little self examination and a bit of planning and you'll be ready to hit the stores, or sites, with confidence.

The first step in creating a budget is looking at what you bring in each month in income and what goes out in expenses. When mapping out expenses, start with the ones that are constant and that must be paid each month. For me, that equates to student loans, a hospital bill (having babies is expensive even with insurance!), a credit card payment, a utility bill, and a monthly diaper delivery from the Honest Company. Next look at expenses that occur regularly, but may vary in amount such as groceries or entertainment (think: night on the town, movie tickets, date night, etc). Set a monthly cap on the amount you should spend on those items. You want to reign in your spending, but be realistic. If you can't live without your daily cup of coffee at the cafe on your way to class/work, then plan it into your budget.

Once you have your regular expenses accounted for, look at what you have remaining from your monthly income and limit yourself to that amount for holiday spending. (NOTE: Usually when making a budget, I account for a 'payment to myself' which is a set amount from each paycheck that I deposit into savings. December is the one month where I don't do this because the interest rate when putting a holiday purchase on a credit card is much more than the interest rate money sitting in a savings account earns. ) Not happy with the amount you see after deducting your expenses from your income? Most people aren't. This is where you need an extra dose of self examination. To make your remaining funds stretch further, are you willing to invest a little extra time to make homemade gifts? To buy your sister that bracelet she always wanted are you willing to cut your coffee expenditure out by making it at home?

If after looking over your numbers, you don't feel like you can reduce your expenses any more and have MUST purchase items remaining on your list, consider making them with credit cards. The whole idea of setting up a budget is to not spend what you don't have, but some times you have to. Before opening any cards, think honestly about when and how you will pay off the purchases. Do you have the money to make the monthly payments? Can you afford the added expense of interest, which is close to 25% with some retailers' cards? If you feel like you can pay off the purchase incrementally, then by all means take the plunge and open up a credit card. As long as you stay smart, planning a budget can help you stay financially fit this season.

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