Are you ready for the holidays? We don’t mean have you bought all your presents. The question is, have you done your financial planning for the holidays?
Huh? That’s not something most people think about, but it is critically important to your financial well-being. When the holidays are still months away is the best time to start planning and saving. Here are some tips.
- Set your savings goals. Holidays are expensive, so your first step is to figure out how much you need to save to pay for everything. The average American shopper spent $882 on holiday gifts last year. But it doesn’t stop there. What about the money you’ll spend on holiday travel, for plane tickets, gas for the car, motel rooms and meals? Don’t ignore the parties and family holiday dinners where you pull out all the stops. And don’t forget the admission tickets for holiday festivities and performances. Those Nutcracker tickets aren’t going to buy themselves, and it all adds up.
- Compute how much you need to save each week. The final tally will likely show that you are going to need $1,000 to $3,000 to pay for everything. Divide that by the number of weeks you have to save. If the result shows it is not possible, then you need to adjust: decide where you will cut spending, or set a date further out by which everything will be paid for. Maybe it is unrealistic to have everything paid for before Christmas, but you might be able to have the holiday charges paid off by January 31.
- Decide how to save. Opening a savings account and socking money away from each paycheck is straightforward, but that may not be enough. It’s time to get creative! Do you have unwanted possessions you can sell via social media to raise some extra cash? Can you work overtime, start a side gig, or take a part-time weekend job for a few months? Can you use frequent traveler points to reduce travel costs, or even cash them in for gifts? Can family members chip in on a big gift, lessening the cost for each person?
- Dial back your withholding. If you are expecting a tax refund for the year, you can claim extra withholding allowances to reduce withholding and fatten your paychecks for the rest of the year. If you do this, don’t forget to adjust your withholdings back based on your income in the coming year. TurboTax W-4 withholding calculator can help you figure out the correct amount of withholding allowances to report on your W-4.
- Plan for next year. Now it’s time to get a jump on next year. The earlier you start saving, the less you’ll have to save each paycheck and the easier it will be to accumulate the funds that you’ll need.