5 Holiday Budgeting Advice Tips You Can Use This Year and Beyond
For those living on retirement income, or actively saving for this phase in their lives, holiday budgeting can help you approach this high-spending season with more confidence. Without external income like salaries and bonuses, you want to give gifts your loved ones will adore without depleting finances for the upcoming new year.
As the world continues adapting and navigating to the new economic challenges posed by the COVID-19 pandemic, this year may prove extra stressful for some. However, by following sound budgeting advice, you can still enjoy the happiest season of the year without worrying about its impact on your bank account.
This year may seem different and difficult for many. To help ease any anxiety over your holiday shopping, here are 5 holiday budgeting advice tips you can put into practice.
Budget for the Holidays in Advance
According to economist Jay L. Zagorsky in 2019, the average person spends about 1% of their annual income on holiday gifts. So, for someone on a fixed income of $40,000 per year, they will likely spend $400 on gifts.
For that same retired person on a $40,000 annual fixed income, if they start saving in January, it would only require $34 per month in savings to exceed a $400 holiday shopping budget. If that person started later in the year, like in May or June, it would require saving a little under $70 per month to reach that goal.
Do note, though, that the statistic Zagorsky provides represents a trend and does not have to apply to your specific financial situation. Saving for holiday shopping in advance makes sense for most retirees, but there is no rule that you ought to spend a specific amount on gifts. Save and spend what you can afford within your means.
When holiday budgeting in advance, we always offer the advice of saving what you can afford. If that person on a $40,000 annual income cannot afford to put aside $34 per month but could manage $25, then that is what works best for that person’s situation. Do not overspend or over-save to the point where meeting your daily needs are financially compromised.
Use a Prepaid Debit Card or Cash to Shop
Once you’ve determined your budget, transfer that money to a prepaid debit card or withdraw it in physical cash. This will help keep spending in check. After the card reaches its limit or the cash has exited your wallet, you have completed your holiday shopping.
Give the Gift of Gift Cards
Go to any grocery store, pharmacy, or big-box retailer and you will find a variety of gift cards to purchase. Whether these are for restaurants, stores, or something else, you can find something that your recipient will appreciate.
The best part? Most gift cards are offered at fixed price points like $25, $50, etc. You can select a price that matches your budget and it allows the person receiving it to use it as they see fit. You may not know what they want from Target, but now you’ve given them the chance to go buy it.
Consider Quality Over Quantity
While younger loved ones may want the shiny new toy, older members of your family or friend group will likely appreciate something with more personal or sentimental value. For example, you may have a historical treasure trove of family memorabilia at home that you could gift to a middle-aged family member to enjoy for the next generation. This can speak volumes beyond a new kitchen appliance, create something new to bond over, and will not cost you anything out of pocket.
Ask Your Gift Recipients for a Wishlist
When shopping online, you can find almost anything at a variety of price points. On sites like Amazon, users can create sharable wishlists where you can view items they want. Here, you can browse their wishlist and pick something for them that matches your holiday budget. Your loved one receives a gift you know they will appreciate and you were able to prevent overspending.
Preparing for 2021
Once the holiday season ends, the New Year begins. Due to much of the economic uncertainty caused by the 2020 COVID-19 pandemic, you may be wondering what is the best way to financially prepare for 2021?
Here are some tips to help you ready your budget for the next year.
If You Haven’t Retired Just Yet, Keep Saving
Are you nearing retirement but still working? Just because you are almost at the end of your long career, that does not mean you should neglect retirement savings. Continue to invest and meet with a financial planner to review your portfolio and identify new diversification opportunities.
Start or Continue Adding to an Emergency Fund
Disasters happen. Whether they involve a public health crisis like COVID-19 or a devastating hurricane, having extra money in these times can help you be prepared to face whatever new challenges appear. For example, if you need to pay for grocery or meal delivery instead of venturing out to the store, having that extra financial cushion will help you afford the higher costs associated with food delivery.
Re-Evaluate Your Current Budget
For many retirees living on a fixed income, budgeting appropriately is vital. Sometimes, you may need to adjust your budget to accommodate for factors like:
- The rising cost of living in your area
- Major purchases: New car, large kitchen appliance, etc.
- Leisure activities and travel
- New medical expenses
- New investments
- And much more
We recommend meeting with your financial advisor before the start of the new year to review your current budget and savings plan. You will be able to assess your recurring expenses and whether you can afford to expand or ought to decrease your budget.
Get Holiday and New Year Budgeting Advice Right Now
Our team at Journey works with countless retirees and soon-to-be-retired people to help shape more secure financial futures that make sense for their lifestyle needs. If you have any questions about holiday budgeting advice or how to best prepare for 2021, contact us any time to speak with one of our representatives.