No Holiday Savings Yet? Here’s How to Cope Now and Plan for Next Year

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Timing is everything when it comes to saving for the holidays. The longer you have to build up cash reserves, plan your budget and buy gifts at the right price, the better you can cover these seasonal costs without going into debt.

Avoiding debt around the holidays can save you from a spending hangover in the new year: On average, shoppers who plan to use credit cards to fund the holidays in 2020 anticipated it would take them a little over three months to pay off their debt, according to a NerdWallet survey of over 2,000 adults conducted by The Harris Poll.

Starting a couple of weeks before peak holiday season might be cutting it a little close for grand savings schemes this year. And uncertainty around economic conditions adds stress. But you do have options.

Here’s how you can plan your spending this year — and start saving for next year’s holidays.

Know where every dollar goes
Find ways to spend more on the things you love, and less on the things you don’t.

Set your plan for this year

Say you’re planning to kick off shopping in earnest around Black Friday, which falls on Nov. 27 this year. You still have a little time for saving and planning. Start with these steps:

Set your holiday budget

If you don’t have much savings, you’ll likely have to use your discretionary income — what’s left over after regular bills — to fund your holidays. Get a solid understanding of how much that is, keeping in mind that you have not only gifts but holiday meals to cover.

Being mindful of what you can afford can keep you from overspending, says Los Angeles-based financial coach Dominique’ Reese.

“I say think about your future self,” Reese says. “How would your future financial self — yourself in January, February, March — feel about the expenses that you made over the holidays?”

If you don't already have one, now is a great time to build a budget that covers all your spending. It doesn't have to be elaborate. Just get down enough information to help you enter 2021 less stressed by your finances, which is a holiday gift to yourself.

Spend smart

Create a gift list that fits your budget, and consider reducing holiday spending across the board to avoid going into debt. If your money is tight, consider whether you can buy for fewer people. Chances are friends and family will be open to suggestions to make the holidays less expensive this year.

Next find good deals. Black Friday and Cyber Monday can offer big savings, but you might find better deals at other times. Start checking prices now so you know what’s a good deal — and what to skip.

Being frugal with holiday meal shopping can go far, says Summer Red, professional development manager at the Association for Financial Counseling & Planning Education.

“Food is central to most holiday celebrations, and there are a lot of foods people will buy even though people don’t like it,” Red says. If no one in your family likes the dark meat of a turkey, for example, consider getting specific cuts rather than a whole bird.

“I encourage people to let go of some traditions and focus on what they really enjoy,” she says. “That means you also have less food waste and less money waste.”

Set yourself up for next year

While planning this year’s holidays, start thinking about how you’ll save money next year.

Track your spending to help inform what you’ll need, Reese advises. “If you went over your budget, set aside more for next year,” she says.

Then, find a saving strategy that works for you. Here are a few options:

  • The 52-week savings challenge: One of Red’s preferred methods, with this “challenge,” you start by saving $1 the first week of December, then $2 the next week, $3 the following week, and so on, adding one dollar each week for a year.  At the end, you’ll have nearly $1,400 to spend for the holidays.

  • Holiday savings accounts: Typically offered by credit unions, these savings accounts are generally locked so you can’t access what you’re putting into savings until the holiday season. Putting just $25 a month into one of these gives you $300 saved for the holidays after a year.

  • Set aside part of your income: Reese suggests automating transfers to build the habit of saving. Having some of your paycheck deposited directly into a savings account by your employer is an easy way to set money aside without thinking about it, too.