Planning to use credit to cover your holiday expenses?
Watch out. Last holiday season, plenty of Americans dug themselves into
gift-giving trouble with an
average debt of $1,054. And roughly half of those consumers
anticipate that they’ll be paying off their balance — with interest — beyond
The solution is surprisingly simple: Ditch the plastic and
switch to cash for this year’s holiday spending.
Ready to conquer this year’s expenses without the
post-holiday spending hangover? Try our easy, five-step process for building a
fool-proof, cash budget.
1. Use cash to save
The beauty of paying with cash is that you can spend only
what you have in hand. But actually having
the cash available requires a bit of planning upfront. And the sooner you start
saving, the better.
Prep for success with a super-simple system. Create a designated
area, like a large jar, for collecting the cash you’re dedicating to holiday
shopping. Then brainstorm creative ways to fill it up. Here are a few ideas to
get you started:
Commit to saving a specific sum of money — maybe
$20 — each week.
Empty your pockets of singles and loose change
into your money jar every day.
Reduce the little luxuries in your life — coffee
runs, manicures, name-brand products, extra T.V. channels — and stash that cash
Sell some stuff that’s cluttering your home but that
another person would love to own.
Earn cash from a small side job like
baby-sitting, shoveling sidewalks, or walking dogs.
Save some (or all) of your Holiday bonus from
2. Plan your spending categories
Often, holiday spending gets out of control simply because
people forget about the sheer number of costs they can incur. Think about it: You’ve
got gifts for family, friends, maybe teachers and service providers. Plus, you might
be hosting a holiday gathering, having an office Secret Santa, traveling to see family or friends, sending holiday cards, shipping presents, purchasing holiday décor, and so on.
Creating a successful budget requires you to be proactive
by getting all of it on your radar upfront. So sit down with a stack of
envelopes. What are the types of costs you need to (or want to) cover this
year? Write each one on a separate envelope.
Make sure your categories are specific, so you don’t miss
anything. Think beyond general costs for travel, and drill down to expenses for
airfare, lodging, and meals. And also set aside an envelope for each person on
your gift list.
3. Make your budget tangible
Traditional budgeting involves pen and paper alongside a
calculator. But handling actual cash allows you to make a tangible budget. And
using real money makes it that much easier for you to see your spending choices and fine-tune your budget.
You’re ready at this point to divvy up the pot of cash
you’ve accumulated during the year. Start by spreading your customized
envelopes across a table. Then allocate money to each of your spending
categories, according to their importance to you.
If you’re lucky, you’ll discover you have more than enough
cash to accomplish all your spending goals. But, if you’re like most people,
you’ll need to make some choices — spend less on your holiday get-together,
limit your gift list, or spend less per person.
Play with your options until you’re happy with the distribution
of cash across your envelope budget. Then write the amount each envelope
contains right on the outside.
4. Get ready to shop
Now it’s time to have some fun! Think carefully about what
each gift recipient enjoys, and brainstorm gift
ideas that land in your budget. (In some cases, your loved one may
love receiving the cash itself!)
Flip through store ads, clip coupons, and visit discount
stores to see where you can maximize your money. Use savings apps or deal sites
to make comparison shopping simple. Don’t forget to consider hidden costs like
taxes and shipping fees, where applicable.
Remember: The only money you can spend on each category or
gift recipient is the cash in your envelope. Of course, if you have leftover
money in one envelope, feel free to add it to another envelope for additional
Of course, in today’s world of online and mobile shopping,
the best deals may not always be local. If using your cash at a physical store
is impossible, or you could save a lot by buying remote, deposit the cash you
plan to spend online and then either use your debit card tied to that account
to make the purchase - tapping the cash you deposited - or pay with a credit
card and use your bank’s bill pay system to make a matching payment to that credit
5. Keep tabs on your cash
Juggling multiple spending priorities can make holiday
planning complicated. Using cash envelopes vastly simplifies the process, but
it’s important to keep tabs on what’s going where.
Make yourself a to-do list for all your holiday spending,
and cross off each activity when you’ve completed it. Keep a running ledger of
how much you’ve budgeted for each category or person relative to how much you
wind up spending on each.
Tracking your money in this fashion will keep you on target
while allowing you to see how much shopping and money are left. As an added
bonus, this approach will also serve as an invaluable resource in planning next
This holiday season, skip the annual tradition of
dreading that January credit card bill. Instead, use the power of cash to your
advantage. With a few simple steps, you can craft a budget that’ll fill your
holiday with magic and start your new year on the right financial foot.
Megan Nye is a personal finance freelance writer who crafts content for businesses, blogs, and publications. Her articles transform even complex money matters into easy-to-understand and actionable information. Ms. Nye’s writing has been featured by Business Insider, U.S. News & World Report, Credit Karma, Citi, Wells Fargo, Lending Tree, and Northwestern Mutual.