Smart Budgeting and Spending for the Holidays

By Claudia Mollerup-Madsen

Like clockwork, the holidays are here again! Black Friday, Small Business Saturday, and Cyber Monday have all successfully come and gone, but yet, many of us are still left with presents to purchase and to-do lists to complete.  Did you know that Houstonians are expected to spend $1,562 this holiday season completing their holiday shopping? That is up three percent from last year.

While Houstonians expect to spend over $500 on gifts for loved ones, a whopping $606 will be spent on “experiences” and $421 on non-gift items such as clothing and home furnishings as we gear up for the holiday season with parties and houseguests. 

All this spending on others, while thoughtful, is bound to get some of us in financial hot water. Last year, three out of five shoppers went into debt holiday shopping.  Don’t let this be you. The key is to budget.  Set a budget for each person you plan to shop for, such as family members, colleagues, friends, even for service providers such as your hairstylist.  Once your budget is set, stick to it.  I have found that using a spreadsheet to track expenses is helpful, or using good old-fashioned pen and paper works well, too. You may be surprised how quickly your expenditures add up, even the small ones. Tracking is an excellent way to stay accountable to your budget.

Being creative is another way to save money and show your loved ones you care. It can be expensive to purchase gifts for all of your friends and family.  Channel your inner DIY-self by making presents.   Homemade salsa, candles, picture frames, hot chocolate, and potpourri are just some examples for making your own gifts.  Another way to stay budget savvy is to draw names or play the Secret Santa game with your friends and family.  Make sure each of those playing or drawing names stays within a realistically pre-determined budget.  

Another strategy for staying on budget is to limit your shopping days.  The less you visit stores or malls, the less likely you are to be tempted.  Moreover, purchasing online can help you stick to your budget, just be careful not to spend more than your budget allows.  Additionally, select items with free shipping instead of choosing fast shipping. 

By using smart strategies like budgeting and tracking your spending, you can avoid lasting debt. Last year, the average consumer racked up over $1,000 in debt as part of their holiday shopping. As a matter of fact, 71 percent of those surveyed said they will use credit cards this holiday season. By budgeting wisely, you can avoid this debt. Credit cards are convenient, but sometimes they make it a little too easy to spend more than planned. Not staying within your budget can give you quite a spending hangover in January.  To combat credit card overuse, use cash whenever possible.

While it is easy to be tempted to buy your loved ones many wonderful treasures, and sometimes even to treat ourselves, ensure you stay the course to avoid debt in the new year.  Should you accrue some debt, pay it off quickly in January.  Be strategic in your shopping, and your new year will be less stressful.

Claudia Mollerup-Madsen is Vice President and Financial Advisor with the Wealth Management Division of Morgan Stanley in Houston.