The holidays may be a magical time of year, but they can also open the door to more spending than a lot of people can afford. Between travel, gifts, decor, and other expenses, it’s easy to close out the season with a huge balance on your credit cards — and a pile of debt hanging over your head right in time for the new year.
The good news, though, is that one simple move on your part could help you avoid that unwanted fate: setting a budget. In a recent TD Bank survey, 73% of consumers say they’re establishing a budget this year. Here’s how to get started with yours.
Step 1: Assess your cash sources
You may have access to different cash sources you can tap for holiday spending, so your first step in setting up your budget is figuring out what those entail. You may have money available to you from:
- Your incoming paychecks
- Your savings account (though you shouldn’t tap your emergency fund for holiday spending)
- Your side hustle
- Your credit card rewards, which you may be able to redeem for cash back or points to use at your favorite merchants
Once you’ve totalled up the amount of money you have available, you’ll know what spending limit you have to work with. If you don’t like that total, you could make changes that free up more cash, like cutting back on some non-essential bills for a month or two or ramping up your side hustle hours.
Step 2: Prioritize your holiday expenses
The tricky thing about the holidays is balancing so many different expense categories. To make your holiday budget work well for you, figure out which expenses should take priority over others.
You may decide the most important thing is to be able to give generous gifts, and that you’re less concerned with decorating your home or buying the nicest Christmas tree. And so you may opt to spend more on presents and less on lights and ornaments.
Step 3: Figure out how to trim your expenses
You may have a certain spending limit for the holidays, and you may wish to prioritize some expenses over others. But before you start spending any money, one more essential step to take involves assessing your expenses and seeing if it’s possible to trim them.
You may, for example, be able to spend less …….