A version of this article was originally written and published by Goldman Sachs Ayco.
While we can’t help you figure out the best gifts for your friends and family, we can help you avoid some of the financial stressors that come with the holiday season. Let’s go over a few quick tips.
When it comes to shopping for the holidays, it’s a good idea to plan as far ahead as you can. Make a list of your planned gifts and their respective prices before buying. That way you can get a better sense of how much you’re going to be spending this season, allowing you to budget accordingly. Think about shopping early to avoid price increases and the last-minute rush. You’ll also have a better chance of snagging those popular gifts before they’re sold out.
And perhaps more importantly, having a plan can help you limit impulse purchases and overspending, leaving yourself in good shape financially for the new year.
When looking to save for the holidays, consider using a sinking fund. Sinking funds are pockets of money that you put aside for specific expenses.
For example, you can create a sinking fund for the holidays and contribute small amounts regularly (weekly, biweekly, etc.) until you reach your goal. If you’re able to set up automatic deposits, you may even want to automatically transfer a portion of your paycheck each month into a savings account that holds your sinking fund.
It’s similar to the concept of “paying yourself first.” The idea is to treat your holiday saving as a separate expense category in your monthly budget, just like groceries or gas.
Of course, things can change and not every month’s budget will look the same, but getting into the habit of setting aside money for your sinking fund before other spending can help make a noticeable difference. And when the holidays come, you will have set aside money for your gift giving.
Creating – and sticking to – a budget isn’t easy. Surprise expenses can pop up, which can derail even the best plan.
As a starting point, review your current spending to see where you could shift some money toward your sinking fund. The sooner you start, the less you’ll need to save from each paycheck to reach your goal.
When setting up your sinking fund budget, be specific and realistic with your expectations. Figure out how much you need to set aside and formulate a savings plan. And then check in regularly throughout the process to ensure your sinking fund is on track. With a well-thought-out savings plan, you can enjoy the holiday season without accruing debt.
In addition to planning early and budgeting, consider taking advantage of credit card miles and cashback opportunities if you have them. For instance, you can collect miles throughout the year and use them for travel during the holidays. Or you can also plan to put big purchases on a card with rewards to get the most out of cashback opportunities.
These may be good options for those with both good credit and good cash flow to begin with. It is also important to weigh the options of miles or cashback rewards against any potential interest or annual fees and see what makes the most sense for your situation. If you need help with your sinking fund or planning your holiday budget, consider talking to a financial advisor who can go over options that fit your circumstances.
The Ayco Company is a Goldman Sachs Company, which is an affiliate of The Goldman Sachs Group, Inc. Marcus by Goldman Sachs® is a brand of Goldman Sachs Bank USA, which is an affiliate of The Goldman Sachs Group, Inc.
This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this site were commissioned and approved by Marcus by Goldman Sachs® but may not reflect the institutional opinions of Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.