How to Save for Holiday Spending


Along with the joy of the holiday season come increases in spending. According to Danny Payne, a certified financial planner practicing in southern California, "Gifts or holiday spending is quite possibly the most overlooked expense that can derail a budget." Therefore, nailing this budget item can help you finish any calendar year on a strong note financially

Budgeting for holiday spending months in advance helps avoid December budget difficulties.

Plan Early

Don't wait until December to start saving for your holiday spending. Payne advises to "set money aside on a monthly basis." Though planning for next year might be one of the last things you want to do after you've finished cleaning up after the last holiday event, it can be a great time to get your budget in order for the year. Review how much extra you spend on your holiday costs and divide by 12 so you know how much extra you should be setting aside each month. For example, if you spend an extra $600 on various gifts and events during the holidays, socking away just $50 each month means you'll be ready to spend without squashing your budget.

Open a Separate Account

If you know you have a hard time not spending money that's sitting in your checking account, consider opening a separate account to hold your holiday spending money. It makes sense creating an earmarked savings account, separate from regular checking or savings, according to Payne. "This can create a physical barrier that discourages many from accessing the funds. Internet banks or an online savings account can be a nice feature for this purpose. Online accounts can be electronically linked to your regular checking or savings account for easy transfer back and forth, and they often offer better rates than brick-and-mortar banks."

Consider Layaway Options

Depending on where you're doing your shopping, using a layaway option may allow you to spread your payments out over time. According to Payne, "Layaway options can seem old-school and counterintuitive when many folks simply charge it to the credit card; however, the process can provide a disciplined approach to someone who has a difficult time controlling their spending." If you know that the extra money you're setting aside for your holiday spending will be a major temptation for you to spend on other things, buying something and putting it on layaway helps make sure that money isn't burning a hole in your pocket and that you're reducing the amount you'll spend around the holidays. However, watch out for fees, as some stores charge extra just to use the layaway option, even if you complete the purchase and pay on time.

Save During the Holidays

Don't let your financial management skills go to waste when it comes to your holiday spending: just because it's the holidays doesn't mean you have to pay full price or overspend. According to CNBC, dining out is one spending category that tends to shoot up during the holiday season, so if that's true of you, plan ahead so that you can have family meals together where everyone contributes something on the menu. That helps keep dining costs down and brings everyone together. Also, you can space your shopping throughout the year to take advantage of sales. If you see a sweater that would be perfect for Grandma on sale in July, buy it then and save it for gifting in December.

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