335 | Your Holiday Spending Plan

The holidays can bring a lot of extra expenses, but the holidays don’t have to be stressful.

With a little planning, you can celebrate without added financial stress or debt.

In this episode, let’s talk about how to estimate your holiday expenses and how saving now can make holiday spending easier to manage.

• • the benefits of planning ahead for holiday expenses

  • how to estimate holiday expenses

  • how to save for the holidays now so you don’t take a big hit in the next couple of months

  • why saving throughout the year can make holiday spending more manageable

   

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You’re listening to Personal Finance for Lawyers. I’m Rho Thomas, and as a busy wife, mom, and former Biglaw associate, I know all too well the tension between the culture of the legal profession and pretty much everything else you want to do in life. That’s why each week, I’m bringing you the information and tools you need to improve your money mindset and manage your money to create true wealth. Because ultimately, it’s not about the money. It’s about the freedom and flexibility the money affords.

Hey friend. Welcome back.

The holiday season is almost upon us, and so I wanted to talk about how to plan for the holidays so that you’re not stressed and ending up with more debt headed into the new year. So we’re going to create a spending plan for the holidays, and the main idea behind this is planning ahead and not just letting the holidays sneak up on you.

It happens every year where we get to the end of the year, and it’s like, “Oh my gosh! How did we get here? It’s already November. It’s already December. I have to buy this. I have to pay for that.” We want to get ahead of that.

Here in America, the biggest holidays tend to be Thanksgiving, Hanukkah, Christmas, and New Year’s. If you live elsewhere or you celebrate other holidays, be thinking about the traditions associated with those, but the principles apply broadly across whatever holidays you celebrate if there are expenses involved.

So we want to get an idea of how much the holidays are going to cost, so that you can be planning for that. Then we want to think about how many paychecks you have between now and then. And finally, we are going to plan out how much you need to save from each check.

Let’s think first about how much the holidays are going to cost. If you are hosting people at your house, this might be a little bit less because you don’t have to think about travel and all of that. You primarily need to be thinking about the food and the drinks and any other little ancillary expenses like that. So think about how much those things are going to cost. How many people are coming? How much do you need to be able to serve them? What do those costs look like?

If you’re traveling, you need to be thinking about how much it’s going to cost to get where you’re going. So, if you’re driving, estimate the cost of gas. Look up the cost of tickets if you’re flying or taking a train. These are data points that we need for your plan. Then you also need to think about where you’re staying. So, are you staying with someone or are you doing something like a hotel or Airbnb. If the latter, how much is that? And at this point in the year, you may have already booked your travel and accommodations, and if so, that’s fine. You can still use this process to calculate how much the remaining things will cost.

For example, we’ve got to be thinking about food while you’re there. Yes, you may be traveling for a holiday. There will likely be food involved with that holiday, but there will likely also be other days that you need to buy something to eat while you’re there before or after the holiday. So you want to be planning for that. You want to think about activities that you’ll do while you’re there.

And I think this is one that people often forget about because the holiday is the main event. That’s the main reason that we’re traveling. But a lot of times in those down times before the holiday or after the holiday, maybe you’re back in your hometown and there are people that you haven’t seen in a while, and you want to catch up with them, and you do lunches or coffee dates, or maybe you just want to go to a movie that has come out, or there are amusement parks or shopping trips, any of those kinds of things. You want to plan for whatever your typical activities are when you’re doing entertainment, you’re doing leisure. How much do those things cost? You want to set aside some money for you to be able to do those things without stress or without having to put it on a credit card, and ending up with more debt going into the new year.

If you’re getting gifts, think about who you’re buying gifts for. How much do you want to spend on each person? This can be a different amount for each person, if you’d like. Maybe you spend more on the closest family to you, and you spend less on people who you aren’t as close with. Maybe you do gifts for your colleagues or things like that. You get to decide. You make the rules here because it’s your money, but you want to be thinking about it ahead of time. So think about who you’re getting gifts for and how much you’re going to spend.

If you are attending holiday parties, which are very common, are you going to buy new outfits? If so, you want to be planning for that. Do you want to get gifts for the hosts? If so, how much are you going to spend on those things? Those are the kinds of things that can fall through the cracks, and again, we don’t think about them, but they are costs that we are incurring.

Once you have all that information, you can see, okay, this is how much I’m planning to spend for the holidays, and you might break it out by holiday, which we’ll talk about in a little bit. But now we can look at the next step, which is how many paychecks you’ll receive between now and the holidays.

So if you’re listening to this in real time when it comes out on October 23rd, you’ve got about a month and a half until Thanksgiving and Hanukkah. You’ve got a little over two months until Christmas and New Year’s Eve. For most people, that’s going to be three to four paychecks.

Then from there, you’re going to divide the total cost that you calculated for all the holiday expenses by the number of checks you’ll receive between now and that holiday. And this is what I was talking about with separating out the holidays because you’re setting aside money from each check, but Thanksgiving and Hanukkah are almost a month earlier than Christmas and New Year’s, so you have fewer checks to cover expenses for those holidays.

You might need to save a little more from each check for Thanksgiving and Hanukkah. You might be able to save a little less for Christmas and New Year’s, but of course that depends on how much you plan to spend for each holiday, because for my family, Christmas and New Year’s, like that whole week, there is by far more expensive than Thanksgiving. But you’ve got a little bit more time for Christmas and New Year’s.

Regardless of how you do it, regardless of how much you’re setting aside for the different holidays and all of that, you’re creating a plan for your spending. And by doing so, you are setting this money aside over the next few months, which should make the end of the year a little bit less stressful, at least with respect to your holidays, with at least with respect to your finances.

And you can take this a step further. Rather than starting to plan in the fall, you could start as early as January, I had a client once who really liked to spend for the holidays, and so we planned out how much she wanted to spend, and then we divided that number by 12 and started setting aside the money in her savings in January. And it was only a little hit to her bank account each month, but by December she had this big pot of money for all of her holiday expenses, and she wasn’t stressed at all. So that’s something for you to consider as well.

Again, the point here is to plan ahead and not just let the holidays sneak up on you. So think about how much you’re going to be spending. Look at all of those different expenses that we’ve talked about. Think about how many checks you’re going to get between now and then. Divide the amount that you’re going to spend by the number of checks that you’re going to get, and then you can set aside that amount from each check.

If you need to adjust, like if you don’t like how much would be coming out of each check, then we’re going to need to adjust down some of those expenses. But you can make that determination once you have the information. You can’t make that determination if you don’t know how much you’re planning to spend. If you’d like some help with mapping out your holiday spending plan, apply for a coaching session. Head to rhothomas.com/apply. I’m happy to help.

All right, that is it for this week’s episode. Please share the episode with a friend or two. That is how we spread this information, help more lawyers get on top of their finances, and as always, I appreciate your support.

As we close out, friend, I pray that you take the information you learn here, apply it in your life, and open up to the realization that wealth is available to you. As you do that consistently, week after week, you’ll continue to take steps to take back control of your time, build wealth, and live the life of freedom and choice you deserve. Talk to you later.