The holiday season, with its festive lights and joyful gatherings, often comes with a sleigh-full of expenses. While most of us plan for gifts and decorations, there are numerous hidden costs that can sneak up and derail your holiday budget.
More than one-third of American adults reported going into debt because of holiday spending in 2022. In other words, lots of people aren’t prepared for the costs associated with the holidays and, as a result, put their financial health in jeopardy.
Let’s unwrap some of these hidden holiday expenses and discuss how you can budget for them.
Shipping costs
The costs of postage and shipping can be easily overlooked. Whether you’re sending gifts to distant relatives or ordering online, the bill can quickly add up.
To budget for this expense, list out all the people you plan to ship gifts to and estimate the total shipping costs. To save money, consider shopping early to take advantage of standard shipping rates, which are typically cheaper than expedited options. You can also plan ahead to buy gifts through sites that offer free or discounted shipping based on details like the amount you spend.
Travel expenses
Travel is a significant part of many people’s holiday plans. Beyond just plane tickets or gas, consider other travel-related expenses that can sneak up on you, like airport parking, car rentals and pet boarding.
To manage these costs, start by planning your travel itinerary early and booking tickets in advance to secure better deals. Setting aside a specific travel fund throughout the year can also alleviate the financial strain when the holidays arrive
Holiday meals and parties
The cost of hosting and attending holiday parties can be surprisingly high. From buying extra groceries and decorations to purchasing a new outfit for the office party, and buying presents for all of the guest, these expenses can make a dent in your budget.
Fortunately, there are a number of ways to keep your party costs down. For example, try potluck-style gatherings to share the cost of meals. Avoid splurging on an outfit last-minute and instead get creative with clothes you already have, or set a spending limit for holiday attire and accessories.
You might even suggest a Secret Santa game or a gift swap for your family get-together, to cut down on the number of gifts everyone has to buy.
Gift wrapping and decorations
Gift wrapping materials and decorations often get left out of the holiday budget. While these expenses seem small, the cost of paper, ribbons, tags and boxes can be significant. Similarly, buying the trendiest decorations and replacing old ornaments and holiday lights can also impact your budget.
To save money, consider DIY solutions, like using recycled materials or reusing decorations from previous years, or making decorations with your family.
Year-end gratuity and gifts
Year-end tips for service providers, like your child’s teacher, mail carrier, or hairstylist, are a common and often overlooked budget item.
Before handing out cash, decide whom you want to tip and how much, and add the total cost into your holiday budget. Homemade gift, hand-written notes or other tokens of appreciation can also be budget-friendly alternatives.
Unexpected guests and last-minute gifts
Unexpected guests can lead to additional food and gift expenses. Avoid last-minute splurges on these guests by keeping a few generic gifts on hand, like scented candles or assorted chocolates. For unplanned gatherings, keep your pantry stocked with affordable items that can easily be turned into a quick meal or snack.
Five budgeting tips
To navigate these hidden expenses and keep your holiday spending in check, it’s vital to have a proactive and adaptable budgeting strategy. Here are some tips to help you prepare and adjust your budget to accommodate these often-overlooked holiday costs:
- Save throughout the year: Start setting money aside for holiday spending well before the season starts, so you have time to adjust and save. Even better, decide how much you can afford to spend and divide by 12, so you can work the cost into your monthly budget as a line item. You can also check to see if your bank or credit union offers a dedicated holiday savings account that you can contribute to year-round.
- Track All Expenses: Keep a record of every holiday-related expense, no matter how small. Your list, whether it’s in a budgeting app or just in a note on your phone, will help you stay on top of your spending, make adjustments as the holiday approaches and get a better idea of how much to budget for next year.
- Set Priorities: Decide what’s most important to you during the holidays and allocate your funds accordingly. That might mean saying “no” to certain events or travel plans, so you can stay on budget and avoid going into debt.
- Get friends and family on board: Let your loved ones know that you plan to change-up some of your holiday traditions. Get ahead of peer-pressure by Inviting them to participate in budget-friendly events and affordable gift-giving.
Make the most of your holiday season without breaking your budget
The holidays are a time of joy and celebration, so they shouldn’t be a source of financial stress. By being mindful of these hidden expenses and incorporating them into your budget, you can enjoy the festive season without the burden of unexpected financial surprises.
If you need assistance with budgeting or managing your finances during the holidays, or any time of year, our network of credit counseling agencies are here to help. A little planning and foresight, along with some free professional support, can make your holiday season both merry and financially bright!