5 Holiday Budgeting Mistakes You Need To Stop Now

By Grant T. Gallagher, External Affairs & Financial Education Manager, Affinity Federal Credit Union

As the holiday season quickly approaches, it’s important to remember that budgeting requires consistency. Though budgeting is an important personal finance practice no matter the season or time of year, not consistently staying on top of it can have long term effects to your bank account. But creating a designated holiday budget doesn’t mean you must forego festivities.

Each year, we see the same 5 holiday budgeting mistakes made by well-intended people looking to enjoy some holiday cheer. Are any of these familiar to you? Now is the best time to plan ahead to avoid blowing the bank this holiday season.

Mistake #1: Creating a budget and not following it.
This is the cardinal sin of budgeting. People are often proactive and spend time creating a budget only to let their emotions get the best of them. Somehow the budget you set for your kids’ gifts is busted by giving into buying that brand new, $300 game console, for example. Slipping away from your budget for one gift can easily have a snowball effect for other presents. If you’re not truly staying within your budget, your well-intended efforts could turn into larger financial problems.  If you’re looking to be extra generous this year, start shopping early. Retailers are under pressure to have competitive pricing year-round. As a result, holiday “sale” prices can often be found sooner.

Mistake #2: Forgetting about certain holiday expenses
Folks often forget about the additional “stuff” they should budget for around the holidays. Do you prefer to dine out during the holidays? Budget for that. Do you like to elaborately decorate for the holidays? Budget for that. Do you like to travel more around the holidays? Starting to see a pattern? You can avoid most unexpected holiday expenses by looking at what you did and spent last year, and either plan to spend the same or commit to cut back. Creating and committing to a strict budget gives you the perfect excuse to say “no” if unwanted – and expensive – plans arise from friends and family.

Mistake #3: Neglecting year-round savings and planning
Once you’ve figured out how much you typically spend around the holidays, you have an amount you can divide by 12 and save for all year! Buying presents can be much less painful to your wallet if you have been saving since January and don’t have to bust out the plastic (and face credit card bills during the cold, dreary, post-holiday months).

“Going shopping,” can be expensive. Instead, plan to “go buying.” Heading to the mall to peruse for gifts usually leads to impulse buys, and not just for your giftees, but for givers as well! Mapping out a plan of what you want and need before you shop minimizes the risk you’ll veer away from your budget and buy unnecessary items.

Mistake #4: Booking holiday travel last minute
Travel costs can be a huge part of holiday expenses, and there’s no quicker way to run up your holiday tab than waiting until last minute to book flights and hotels. Typically, the earlier you book the better, but shopping around on deal websites can work in your favor, as well -- even if you don’t have time on your side. If you have family that is scattered across the country, you can “graciously” offer to host this year and save the travel expenses for next year.

Mistake #5: Not being honest with yourself about your money
Paying for holiday expenses with a credit card can be beneficial for large purchases like gifts and travel (hello, rewards points!), but it requires a certain level of discipline to make sure you don’t get into hot financial water. Paying with your credit card may allow you to earn additional perks and benefits. However, if you know that you will be tempted to overspend with the convenience of a credit card, you are better off sticking to cash and avoiding the headache later.

You can still have fun on a holiday budget -- if you plan for it! Budgeting for fun activities with your loved ones allows you to not only save ahead and plan, but also enjoy your holiday season without the added stress about your credit card statement.

So remember – stick to your budget.  No seriously, stick to it! And if you’re ever in doubt about where to start, connect with us to learn more about our free financial education and literacy programs!

Additional Resources:

Why Saving Money Under Your Mattress is a Big and Unnecessary Risk

How to Kick Holiday Debt to the Curb