When it comes to taking control of holiday spending this year, a new survey by Deloitte offers insight on where to start. If you want to stay out of the red on Black Friday, Cyber Monday and beyond, start by looking in the mirror.
When you think about the holiday season, you may think that spending on gifts takes up much of your cash. But in fact, spending on gifts accounts for just $511 of the estimated $1,496 that survey respondents indicated they plan to spend over the holidays. The rest will go to non-gift items—the stuff we buy for ourselves—as well as "experiences" such as entertaining at home and socializing outside the home. In fact, millennials reported that "experiences spending" will make up the largest section of their holiday spending—$618.
One of the best ways to manage holiday spending is to create a budget that anticipates more than just spending on gifts. These four steps can help you set, and keep, a holiday budget.
1. Budget for "self-gifted" items, entertaining and socializing. Black Friday and Cyber Monday have become hard-to-resist sales events for household and personal expenditures. Prices may be good, but ask yourself if they are worth spending the money, or incurring credit card debt. And if you plan to entertain or celebrate outside your home during the holidays, be sure to include these estimated costs in your budget, too—they can quickly add up.
2. Check your holiday list for unnecessary expenses, or items that you can purchase at some other time of the year. The goal of this list is to itemize expenses that fall outside of your normal monthly spending, so you don't spend too much. It's also a good idea to designate which items you intend to purchase with cash and which gifts, if any, go on plastic. This can help you control credit card spending.
3. Compare your list to your regular and out-of-pocket monthly bills, such as mortgage or rent payments, car loans, utilities and daily expenses like gas and dining out. If you don't already track these expenses, start now. You can use this worksheet to track your spending.
4. Look for ways to save. Now that you can see how you spend—and plan to spend—your money, look for ways to save. Some strategies may be simple, like cutting back on holiday entertainment or decorating costs. The holiday season is also a good time to review your current cell phone or cable packages and inquire about special offers that could save you money for many months to come (but be sure to read the fine print).
Taking control of holiday spending is a gift that can pay big dividends in the coming year. If you do well, you can accomplish other financial goals, such as building up your emergency fund or increasing your retirement savings.
Subscribe to FINRA's The Alert Investor newsletter for more information about saving and investing.
