Holiday budgets. No, they’re not as fun as the decorating, but they’re just as essential. And if there’s one thing we know about spreading all that holiday cheer, it’s that planning ahead is the best way to be prepared. When you know exactly what you can afford, you’ll know exactly how you can spend — even splurge on occasion.
An ideal approach is to start saving at least a couple of months early so that you’re prepared for the increased spending that comes with the holidays. Feeling in control and not just “reacting” to circumstances or dealing with a January spending hangover will do wonders for your mental state. “In Fidelity’s recent 2022 Money Mindset survey, we found that 2 in 3 people felt that in order to save you have to cut back on things that bring you joy,” says Megan Moore, vice president, Fidelity Bloom.
The Weight of Expectations
It’s not uncommon for women to handle the bulk of the work around holiday gift-giving as well. As a result, 38% of women say they experience holiday spending stress. Yes, we’re anxious about costs, but we also feel emotional pressure to “deliver” on expectations that our children or other family members may have.
“There are certainly cultural expectations that often fall on women (i.e. when your kid shows up at another kid’s birthday party with a gift, it’s often the “mom” doing the emotional and physical labor to make that happen),” says Meredith Stoddard, Life Events Experience Lead at Fidelity Investments. Furthermore, women are much more likely to be responsible for bringing a host/hostess gift when going to someone’s house and/or exchanging gifts with their friends. And that even extends to charitable giving.
Not only do women typically hold more debt than men, they’re also not as confident in the success of their own financial future. Fidelity’s Women and Investing study found that only 33% of women actually see themselves as investors. And only 42% feel confident in their ability to save for future milestones like retirement, says Stoddard.
The Spending + Family Connection
With all that said, now is a really good time to think about your holiday spending in terms of how you’ll use your gifts and your time to bring meaning to the season, foster connection with your family, and overall have more of what’s most important to you. “Some steps you can take are to start setting aside money or start to put together a list or make some of those purchases now so that you can better cash flow them throughout the Fall season. Keep in mind also that with supply chain challenges continuing as they have been in recent years, it can give you peace of mind to know that the gift you have in mind is available,” says Stoddard.
If financial constraints are more challenging this year than in year’s past, (hello, 9% inflation) you can also set expectations with loved ones around what might be different this year, and collectively figure out how you can create meaning in other ways (i.e. making cookies together, volunteering your time together, etc.)
Shop Early… and Save Early, Too
Data from the National Retail Federation shows that consumers have begun shopping earlier over the past decade. Why? “To spread out their budgets and avoid the stress of doing so much in a short window,” says Jennifer Seitz, Certified Financial Education Instructor (CFEI) and Director of Education at family finance company Greenlight.
In 2021, 61% of consumers started their holiday shopping by early November — up by 10% from 2011. “That’s weeks earlier than traditional “holiday” shopping days, like Black Friday and Cyber Monday. Being in control of your budget (and time) takes away uncertainty and allows you to focus on the fun with family and friends, not any last-minute gift sprees or surprises,” says Seitz.
Your spending plan should include gifts for family, friends, and coworkers, along with any holiday-related spending your expect. “This includes food and decorations for holiday meals or gatherings, and special events, like a babysitter for parents attending a company holiday party,” says Seitz, who cautions that those expenses can sneak up. “It’s a chance to prioritize your spending on what will bring the most enjoyment for you and those on your gift list,” she says.
The average American planned to spend about $998 on winter holidays in 2021, and many spent more than they could afford by going into credit card debt. If you don’t start setting aside money until November for the holidays, that’s about $500 per month in the last two months of the year. But if you set aside money all year long… that’s less than $85 per month. Much less stress — and much less interest owed on credit card bills, even if they are paid off in a couple months.
“If you know you usually spend about $500 on holiday shopping for example, you can either save $42 per month for 12 months – if you start January 1 – to reach that goal,” says Lauren Bringle, an accredited financial counselor Self Financial.
Or, if you didn’t get that far ahead this year, start saving whatever you can on a daily, monthly, or weekly basis to put towards your holiday spending. “Every dollar you save is another dollar you don’t have to borrow later to cover holiday costs,” says Bringle.
Women & Spending Stress
According to research done by Bright Horizons Family Solutions in 2017, women are twice as likely as men to make sure all family responsibilities are handled (and we know there are so many of them around the holidays) and three times as likely to be the keeper of their children’s schedules. “Essentially, women handle the bulk of parenting and household responsibilities, which also include purchasing Christmas presents, so it isn’t surprising that they are the primary spenders during the holidays,” says Laura Cuber, Certified Financial Planner and wealth advisor at Bartlett Wealth Management.
More broadly, women make 85% of all consumer purchases in the U.S., according to Forbes, and drive 70-80% of spending among consumers. “Women do not just make purchases for themselves—they make purchases for their kids and their partners. This means that women’s spending is often seen as higher than men’s spending, but it is because they are responsible for doing more of their household’s purchasing,” says Cuber.
If you do plan to incur debt during the holidays that can’t be avoided or budgeted for, make sure you understand what you’re signing up for. “If you use credit cards, be sure to know what your interest rate is. Credit card interest is higher than interest on other forms of debt and can make your holiday purchases even more expensive,” says Cuber. (And please beware of buy now, pay later (BNPL) companies. Not only are returns complicated, you may actually be inspired to spend more.)
“While the installment payments themselves might be interest-free, there can often be late fees or interest penalties if you don’t make the payments on time. Additionally, being able to defer payments can encourage consumers to spend more than they intended to, so it’s important to set your budget before buying,” says Cuber.
Use This Time To Kick Your Credit Into Shape
If you’ve been looking to improve your credit, don’t see the holidays as a time to fall off the wagon or to revert back to your old ways. Instead, use this time to keep bulking up your score. “Better credit could mean lower interest rates on credit cards and more access to credit cards with rewards options like gift cards or cash back,” says Bringle.
You can use those reward points you rack up over the year for presents or to cover holiday travel costs. Not to mention, lower interest rates mean less debt to pay back if you do need to carry a balance on your credit card after the holidays.
Focus on growing your income too. When you look at the research, how men and women tend to be spoken to about money is different. “For men, the dialogue usually centers around taking risks and growing wealth through investments, pay raises, and more. For women, the focus tends to be on how we can cut back on expenses and save money,” says Bringle. Here’s how women can get started investing, and negotiate for the salaries we deserve.
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