Three Ways to be Financially Responsible This Holiday Season
The holiday season is about generosity and giving; however, it can quickly become the season of overspending too. According to a recent survey by Affirm, 70 percent of Americans spend over budget during the holidays. And as we recover from the effects of the pandemic, finances are at the forefront of many people’s minds. Here are three ways you can spread holiday cheer without breaking the bank:
Have a Spending Limit
Holiday spending can be sneaky. A few hundred dollars here and there can add up to thousands if you’re not careful. And spending goes beyond gift giving. People often spend extra on food, decorations, wrapping paper, travel, and more during the holidays. By having a spending limit, you eliminate stress by focusing on what’s most important and saying no to unnecessary expenditures. A holiday budget doesn’t need to be complicated, either. Here are some simple ways to get started:
- Set a spending limit for each person on your gift list.
- List out upcoming travel expenses.
- Make a budget for food, alcohol, and decorations for holiday events you plan to host.
- Create a budget for clothing and accessories if you’re planning to attend holiday parties.
Simply knowing what you want to spend money on this holiday season can help you stay responsible. In addition, it’s also helpful to distinguish between wants and needs. For example, do you “need” that new holiday outfit or could you wear something in your closet? Could you host a potluck holiday dinner instead of purchasing an entire meal yourself? Outlining your expenditures will help you avoid sticker shock when the season is over.
Use Credit Wisely
Credit cards offer convenience and flexibility, which can be useful during the holiday season. They allow you to buy now and pay later, saving your cash and delaying payments until a later date when you have more accessible funds. Many credit cards also allow you to earn rewards such as discounts on travel or even cash back for using the card to make purchases. But before you use a credit card, know the terms of your arrangement and what it may cost you:
If you charge something to your credit card and don’t pay off the balance within the grace period, you’ll be charged interest on that purchase. In fact, some transactions may not have a grace period and interest may start to accrue immediately. Be sure you know your credit card’s Annual Percentage Rate (APR) and spend accordingly.
Be wary of any fees you may incur using a credit card. Some financial institutions will charge you fees specific to the type of credit card you use, such as an annual membership fee. If your card allows you to withdraw cash from your line of credit, you may be charged an additional cash advance fee, usually a percentage of your total cash withdrawal.
One of the greatest risks of using a credit card (particularly during the holidays) is overusing it to pay for unnecessary items, or “wants.” If you can’t pay off your balance, you will end up paying interest on those unnecessary purchases. Money spent on interest, even if it’s a few dollars, is money you can’t put toward your savings goals. That’s why it’s important to stick to the spending budget discussed earlier, even when using a credit card.
It can be easy to lose track of purchases during the holidays, especially when ordering gifts online. Start early and don’t leave shopping until the last minute. Spacing out gift buying can help you avoid purchasing everything all at once. And between supply chain issues, the rising cost of goods, and merchandise shortages, starting your shopping early can help you save your money—and your sanity.
The holidays can be stressful. But it’s important to remember that spending time with family and friends is what’s most important. Sandy Spring Bank is here to help you stay on track with your financial goals, all year long. We’re a community bank with over 50 locations across Maryland, Virginia, and Washington, DC. Contact us today at 800.399.5919 or visit a branch near you to discuss your banking needs.