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Financial planning tips

November 06, 2014

Five smart ways to stretch your holiday budget

You can still pamper the ones you love this holiday season without ending up over your head in debt. It just takes a little planning and creativity.

The holiday season is just around the corner, bringing with it parties, gift-giving, travel and extravagant feasts — but how can you do it all on a limited income? Here are some tips for enjoying the holidays without breaking the bank:

1. Plan early and set a budget

Budgeting for the holiday season is something you should think about in January or February, rather than at the end of the year, explains Sylvia Lim, a Vancouver-based Certified Financial Planner, Certified General Accountant and author of Finances after 55, in order to avoid the stress of dealing with all holiday-related expenses at once. Take a look at the discretionary amount you have to spend on your family and friends, make a list of those you're planning to buy gifts for, as well as any expected travel plans, events and parties early in the year. Plan how much you want to spend on each person/event and be sure to stick to your budget.

2. Plan how to meet that budget

Setting cash aside every month is a great way to save for your holiday expenses, says Lim. For example, if you think you want to spend $1,200 on Christmas gifts or travel expenses, set aside $100 a month. "That way, you don't have the pressure of coming up with the money when it's holiday-time, or not having the money, spending it, and then dealing with the aftermath in the New Year," she says. If you do use your credit card for holiday shopping/expenses, Lim recommends that you have the money behind it to pay the bill when it arrives, to avoid paying additional interest charges in the New Year.

3. Know who you want to buy gifts for and purchase early

Make a list of those you're buying for, and ask family and friends ahead of time what they would like (ideally by September or October) says Lim. This way you can keep an eye out for sales prior to Thanksgiving, such as end-of-season clothing sales.

4. Be honest with your family

It is possible to indulge the ones you care about during the holiday season and stay within your budget, says Lim, but don't live beyond your means to do it. Be honest with your family if this is not a good time for you to be spending too much money on gifts. One money-saving holiday tip might involve suggesting a change in tradition. An idea that is becoming quite popular, she says, involves drawing names within your family -- with the end goal being that each person buys a nice gift for one person, instead of buying gifts for everyone. Alternatively, if you're hosting a holiday dinner, consider reducing your costs by making it potluck -- ask everyone to bring their favourite dish.

5. Get crafty

Are you a talented knitter? Artist? Woodworker? Or perhaps you bake in your spare time? Use your talents to make personalized, handcrafted gifts for those on your holiday list -- this can often cut costs, and everyone is sure to appreciate the thought and effort that you've put in.

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