An important life skill that supports one’s financial journey is budgeting.
A budget helps you become more mindful of your finances and intentional in spending and saving, setting you up to achieve your life goals while enjoying what the holiday season has to offer.
Many tend to overspend during the holidays. With parties, gift giving, and the season’s air of joy and celebration, it is easy to see that salaries and bonuses quickly disappear just as they enter a deposit account.
While many feel the urge to reward themselves and their loved ones, creating and sticking to a budget helps people enjoy the holidays and stay on track with their goals without the stress of financial strain.
What is a budget?
A budget outlines income and expenses for a specific period. It helps one to see where money comes from, where it is going, and how much is lacking or is in excess.
It serves as a map that helps manage money and avoid financial stress.
Remember that a budget is not about deprivation. It is about making informed financial choices that match your goals.
How to budget
The first step in budgeting is knowing one’s total income. This includes salary, bonuses, and any other income sources for a period.
The next step is identifying needs, wants, or goals. Needs typically include expenses like housing, transportation, food, and debt payments. Wants may consist of discretionary spending for shopping or going out, but may also account for bigger goals, such as a car.
There is no fixed rule for a spending and saving plan. Some suggest the 50-30-20 method, where 50% of income is allocated to needs, 30% to wants, and 20% to savings and investments. Some people, faced with limited funds, follow the 70-20-10 ratio. There is no one-size-fits-all ratio in budgeting. A budget should fit your goals and lifestyle.
Track everything. Applications or Excel sheets available online help track money coming in and out during each period. Earnest Learning has a budget tracker here.
Tips for budgeting the holiday bonus
Clear goals lead to better budgeting and more intentional spending and saving.
Reflecting on spending priorities and goals is essential. Without it, it is easy to be sidetracked, especially with windfall income and the spending frenzy during the holidays.
Ask if a holiday bonus should be allocated. Gifts? Savings? Emergency fund? Car fund? Family vacation? Debt payment?
Knowing priorities helps better allot funds for items from holiday gifts to life goals like owning a home.
If tempted to spend all your windfall income at once, consider delaying gratification and setting up specific deposit accounts dedicated to fun, such as shopping, and for life milestones, like a house or car fund.
This helps prevent impulse spending that quickly depletes funds. Financial mindfulness enables one to fully enjoy life’s best moments—such as the holiday season—while also benefiting one’s future.
By creating a budget, tracking spending, and avoiding impulsive purchases, one can enjoy the holidays and beyond without the stress of financial strain.
Earnest Learning discusses budgeting in more detail in Chapter 3 of its free e-book.
Disclaimer: This article is for general information purposes and does not constitute formal financial advice. Always do further research before making financial decisions.
Learn more about the other G.I.F.T methods:
G - Get guided by goals
I - Invest your bonus
T - Take advantage of deals