How to budget for holiday shopping this year

Here’s how to make sure you’ve saved enough to cover all your holiday expenses this season, plus some expert tips on how to set yourself up for success next year.

How much are Americans expected to spend this holiday season?

Recent data from Deloitte predicts holiday sales this season to be between $1.45 trillion and $1.47 trillion. That’s a 4% to 6% increase from the 2021 holiday season, with online retail sales growing 13% to 14%. That might seem like a huge boost, but those estimates are lower than 2021 growth.

Like last year, many key sectors saw year-over-year sales increases thanks to holiday shoppers – even amid the economic fallout from the COVID-19 pandemic. Here’s a look at some of the categories that saw the biggest growth during the 2021 holiday season:

These latest figures from the National Retail Federation show that consumers plan to spend almost $1,000 on gifts, groceries, decorations and other holiday-related purchases ahead of the 2021 holiday season.

According to experts, the drop in demand this year is due to the rising inflation rate. But even with rising commodity prices, there are steps you can take now to minimize the financial burden.

Calculate your vacation costs

So how much do you expect to spend this holiday season? The amount ultimately depends on how you celebrate and who you celebrate with. To calculate exactly how much you need to save to cover your vacation expenses, do the following:

1. Double check how much you spent last year

While some people spend big during the holiday season, others prefer to keep it conservative. Knowing how much you spent on gifts, travel, and celebrations last year can help you determine if you’re on track to meet your savings goal for this year. “While inflation has been hot this year, it gives you an idea of ​​how much you’ve spent on gifts, and while you’re at it, take the time to see if you’re overspending on gifts,” says Jay Zigmont, CFP and Founder of Childfree Wealth.

2. Make a list of gift recipients

How many people are you shopping for this year? The number is likely to make up the largest part of your vacation budget if you don’t keep a close eye on your spending per person – especially if you have a larger family or circle of friends. The best way to keep track of how much you’re spending and for whom is to write it down.

“A three-column table should do the trick,” says Herman Thompson, CFP at Innovative Financial Group. “One column for the name, one for the gift and one for the price. A cell in the spreadsheet that contains a running total of the expense column helps you keep track of your total spend. From there you can trim accordingly.”

3. Decide how you want to celebrate

A small get-together with loved ones back home versus a family vacation abroad can make a big difference in your pre-holiday savings. Make it a point to plan ahead of time how and where you’ll be celebrating the holidays, so you can avoid paying high prices for travel, car rentals and accommodation and have more time to scour the internet for deals. If you choose to keep it local, know that if you’re attending another celebration, you’ll still need to plan for party hosting costs such as food and decorations or gifts for hosts or hostesses.

Once you’ve got the numbers together to see how much the season will cost you, use them to calculate how much you need to save each month leading up to the holidays. This helps you plan ahead so you can comfortably cover your expenses and avoid going into debt or breaking your budget to make it all happen.

5 ways to start saving for the holidays now

In a perfect world, you would make a habit of saving for the holidays throughout the year. “The holidays come every year, so just put that amount aside each month,” says Zigmont. Many banks are now offering a savings account with ‘buckets’ where you can put those funds.”

Saving all year round is a great way to cut down on your vacation spending. Let’s say you want to save $90 a month on vacation expenses. When the season starts, you’ll have over $1,000 in your bank account to cover your expenses. This might seem like an inconvenience in the short term, but it will likely be easier to manage than saving $270 a month for the last four months of the year.

Saving upfront isn’t always possible, especially when you have other pressing financial commitments. If you haven’t planned ahead this year, here are some ways to get back on track:

Create a vacation budget: Once you’ve rolled up the numbers to figure out how much you spent last year and you’ve finalized your vacation plans and gift list, you should create a vacation budget that breaks that number down into a monthly savings goal. Remember, it’s okay if you need to reevaluate your vacation plans to make cost recovery more realistic. If the amount you need to save is getting to you, go back to the drawing board and see if you need to reconsider your gift list or opt for a smaller celebration.

Take a closer look at your current spending behavior: If your monthly savings goal is just out of reach, look for ways to lower your monthly expenses and invest those savings in your vacation savings. “One of the easiest ways to save money is to swap grocery delivery fees for a warehouse membership,” says Thompson. “Food delivery is convenient, but restaurant prices, delivery fees, and tips add up quickly. Warehouses offer quality food at competitive prices. You can cook your food at home and eat healthy while saving money.” Another tip to increase your savings: Check your monthly subscriptions – you could be paying for unused or forgotten subscriptions.

Look for ways to increase your disposable income: If you feel like you’re only making enough to cover bare necessities, look for ways to earn extra income to fund your vacation savings account. Consider taking up a side hustle in your free time or use this as an opportunity to declutter your home and resell.

Benefit from the sale: You don’t have to wait for the holidays to start shopping. Take advantage of holidays like Black Friday, Cyber ​​Monday, and Small Business Saturday to save on gifts for loved ones. You can also sign up to receive emails from your favorite retailers so you never miss a sale or coupon. If you find that you’ve spent less on a gift for someone than you originally budgeted for, you can reallocate some money to another part of your budget and have some extra money to cover travel or holiday decorating expenses.

Set yourself up for the next year: Finding yourself in a financial crisis is stressful, do what you can now to prepare for the year ahead. Find the right savings account for your vacation savings and automate your deposits so you can keep track of your goals without adding another task to your monthly to-do list. Your future self will thank you.

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