How to Adjust Your Budget Now for Holiday Spending

How to Adjust Your Budget for the Holidays

You don't have to jeopardize your financial health to spread some good cheer this holiday season. By planning now, you can adjust your budget to avoid accumulating debt you'll be repaying long after you ring in the new year. Here are some tips to get you started.

Estimate How Much You Plan to Spend

Making a list of items you typically spend money on is a good place to start. Don't forget to include non-gift purchases, such as decorations, food and entertainment. Once you have your list, make a budget for each category and person on your gift-giving list. Be realistic—underestimating your expenses won't help you keep your budget on track.

Reviewing last year's holiday expenses can help you get started. You can see where you may need to scale back, scale up or keep your spending about the same.

Reduce Your Discretionary Spending

Now, it's time to look for ways to cut back on your everyday spending to make room for holiday expenses. Finding places in your budget where you can reduce or cut out discretionary spending will free up money for gifts and other items. Eliminating unused subscriptions is a great place to start. Reducing other nonessential spending, such as dining out, entertainment and streaming services, can add wiggle room to your budget.

Negotiate Bills

Some companies may be willing to reduce your payments. Lowering your monthly bills can free up cash to use for holiday expenses. Some companies may offer discounts when you put your bills on autopay—if you haven't already. It may also be worth looking into cheaper packages for services, such as cellphones, cable, streaming, internet and more.

Get a Side Hustle

If you can't cut back on your spending, you may want to bring in more income. Getting a side hustle can help you earn extra money for the holidays. There are many options to choose from based on your skills, schedule and interests.

For example, you could work for a rideshare, food delivery or grocery delivery service. Dog walking, pet sitting and babysitting are other flexible options that allow you to work when it's convenient for you. You may also consider taking on a part-time seasonal gig to earn extra cash.

How to Stick to Your Budget

Having a budget is one thing. Sticking to it is another. Retailers are masters at getting people to spend more than they planned. It's up to you to stick to your budget so your finances stay on track. Fortunately, plenty of budgeting strategies can help you stick with your spending plan this holiday season—even if you're on a low income.

1. Take Advantage of Technology

Technology makes tracking your spending easy. Plenty of budgeting apps allow you to create a custom budget to help ensure you don't spend more than you planned. Some even alert you if you're close to overspending so you can adjust your budget.

If you prefer, pencil and paper work fine too. Just make sure to record each expense as you make it.

2. Reduce Impulse Spending

Impulse spending can wreak havoc on any budget. To minimize spur-of-the-moment purchases, make a list and stick to it when shopping in stores. If you're more tempted to overspend with plastic in your wallet, leave the credit cards at home. Take only enough cash for the items on your list.

When shopping online, remove saved credit cards from shopping sites, so you have to think twice before clicking "buy now."

3. Use Credit Cards Wisely

Credit cards are convenient, and many allow you to earn cash back and other rewards. However, they also make it easy to overspend and accumulate debt if you carry a balance. If you use credit cards for your holiday expenses, charge only what you can afford to pay back every month.

4. Go Old School

If you're worried you'll spend more than you should with plastic, skip the credit cards entirely. Consider trying the envelope method instead. It's a technique that requires you to designate money for different monthly spending categories (such as food, utilities and the like). If you spend all the money from a specific category, you can't add more to it.

The goal is to not make any more purchases in that category. However, you can use money from another envelope if it's absolutely necessary. But you'll need to adjust your spending to make up for the shortfall. You can use cash or digital apps to accomplish the same result.

5. Remember What's Most Important

It's easy to get caught up in the hustle and bustle of the season. Adjusting your mindset—in addition to your budget—can help you stay on track. When you're tempted to overspend, remember that spending time with the people you love is most important.

Ways to Save Money on Holiday Shopping

Now that you've adjusted your budget and developed strategies to help you stick to it, it's time to go shopping. Nobody wants to spend more than they have to. Here are some tips to help you save on holiday purchases.

• Compare prices. Prices may vary between stores. Shopping around can help you find the lowest prices.
• Sign up for cash back websites. When you purchase items for the holidays on cash back sites, you'll get money back on the things you buy.
• Use a rewards credit card. A rewards credit card earns you cash back, points, miles or other rewards on purchases you make.
• Cash in your credit card rewards. If you have rewards you haven't used, consider cashing them in to cover holiday expenses.
• Take advantage of sales. Many retailers have sales during the holiday season that can help you cut costs.
• Use coupons and coupon codes. Yes, brick-and-mortar stores still offer them, and so do many online retailers. In addition to saving on specific items, you may also find coupons for saving a certain amount of money when you spend a particular amount.

Keep Your Credit Shiny and Bright

It's easy to overspend during the holidays, and credit cards make it even easier. But when used responsibly, they are a convenient and easy-to-use payment method that may help you earn rewards you can cash in for next year's holiday shopping. Just make sure to include credit card use in your holiday budget to keep you on track financially.

If you choose to use credit cards, paying the balance in full every month can help you avoid debt you could spend months paying off. Keeping your credit utilization ratio low and paying your bills on time is important for maintaining healthy credit during and after the holidays. Check your free credit report and credit score to ensure your habits are helping—not hurting—your credit score.