Your 2023 Holiday Budget Guide, Part 1
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Watch my full YouTube video on this topic here.
Last year, Americans took on a record amount of holiday credit card debt, averaging $1,549 per household. And it gets worse: it took most people an average of 5 months to pay off their holiday-related credit card debt, leaving them with extra debt and stress well into the spring of 2023.
Keeping our credit cards paid off just keeps getting more challenging with inflated prices still around, especially for things like groceries and housing costs. You may be going into the holiday season with existing credit balances, only to keep adding to them with holiday shopping. Here’s Part 1 of your guide to preventing the holidays from becoming a debt gift that keeps on giving well into 2024!
1. Get those credit cards completely paid off going into the holiday season. This is especially important right now, since Congress narrowly averted a government shutdown by extending their budget deadline another 45 days, through November 17, 2023. Hopefully lawmakers will pass a budget for fiscal year 2024 by then, but if they don’t the country faces yet another threat of shutdown. If you’re a federal employee, federal contractor, or military member, know that the only continuing pay Congress provided for through the end of 2023 is for Federal Aviation Administration (FAA) employees. If the government shuts down after November 17, federal workers and military families will be facing a stressful holiday season with no pay.
2. Make a list, check it twice. If Santa Claus can make his holiday lists, so can you! Starting in October (or earlier), make up a detailed list of ALL your expected holiday expenses this year. Write down the names of everyone you plan to buy gifts for, and how much you can afford to spend on each person. Then make categories for holiday-related expenses like decorations, food for holiday meals and parties, holiday cards and postage, travel costs if you plan to travel over the holidays, year-end charitable giving, and so on. Figure out how much you can afford to spend on all these holiday categories without going into debt or cutting into your savings and investing goals. This year, that number might be pretty darn small. It’s best to be honest with yourself about this in October though, and avoid that January credit card debt snowball. If you need more budget help, you can watch my budgeting playlist on YouTube!
3. Armed with your holiday expenses list, you’re ready to set your holiday budget. Make a commitment in October to stick to that number like glue over the next 3 months. Before you start doing any holiday shopping, figure out how much you can afford to spend. With inflation ongoing, this might be less than you’ve spent in previous years. That’s okay! You need to keep prioritizing your financial wellbeing throughout the holidays, so you’re still able to save, invest, and above all avoid running up debt on things that may not really bring you (or your loved ones) much joy.
4. Use your debit cards or cash for holiday purchases. This is probably the easiest way to avoid a holiday debt snowball in the first place! Once the money for the holidays is gone, it’s gone: no running balances that you’ll be paying well into 2024. Do make sure that you have a credit card in place for overdraft protection for your checking account associated with your debit card, however: overdraft fees can run $25 or more per bounced purchase, which isn’t going to help your holiday budget out at all.