How one can Get Your Funds Again on Monitor After Vacation Season Spending
The average American spends $1,050 on holiday gifts, swag, and travel, according to a 2019 National Retail Federation study summarized by USA Today.
That’s more than 1% of the U.S. median household income — which doesn’t sound like a lot until you consider that holiday spending is entirely discretionary. In an economy where 6 in 10 consumers live paycheck to paycheck, according to a 2019 survey by Charles Schwab, even modest increases in discretionary spending can nudge – or shove – household finances off track.
If your finances are worse for the wear after the holiday spending season, don’t feel guilty. You’re not alone. Along with the millions of other Americans who spent more than they can really afford this season, you can get your financial house in order soon enough.
Many of these broadly applicable strategies to get your finances back on track after the holidays make for natural New Year’s resolutions. Others are sensible lifestyle tweaks that could pay dividends long after your post-holiday financial hangover fades.
Tips to Get Your Finances on Track After the Holidays
1. Create a Household Budget
If you’re new to household budgeting, start with a personal budget app like Mint or a Mint alternative. Choose an app that integrates with your bank account (and other financial accounts) and incorporates real-time bank and credit card balance information into your budget. It will let you know before it’s too late if you’re in danger of exceeding your budget’s spending limits for the period.
If you prefer a DIY approach to budgeting, don’t overcomplicate things – unless you enjoy detailed spreadsheets, in which case, more power to you. Choose a budgeting strategy that makes sense to you, not to impress the accountants in your social circle.
Simple, popular strategies include zero-based budgeting, a category-based approach popularized by You Need a Budget (read our You Need A Budget review), a well-regarded Mint alternative.
Zero-based budgeting assigns a job – such as padding your emergency fund, adding to your child’s education fund, purchasing groceries, or financing your monthly night out on the town – to every dollar of income. Between savings, necessities, and discretionary spending, a proper zero-based budget leaves nothing at the end of the month.
Pro tip: If you’re a spreadsheet type of person, you can set up your budget through Tiller. You can customize a budget template that works for you, and they’ll automatically pull transactions into a Google Sheet.
2. Set a Monthly Savings Goal (aka Pay Yourself First)
If zero-based budgeting sounds too complicated, consider a popular budgeting alternative: pay yourself first.
Unlike traditional budgets, which can get exceedingly granular, pay-yourself-first budgeting only requires you to satisfy all monthly savings goals before spending a dime on needs and wants. Depending on your age, lifestyle, and financial position, these goals could include building an emergency fund, setting aside money for a down payment on a house, funding expensive discretionary activities like an international vacation, and growing long-term savings buckets for your kids’ education or your retirement.
Each goal gets a set amount each month. Once you set these funds aside, you’re free to spend the rest of your earnings as you see fit. Though necessities like housing and food naturally take precedence over discretionary spending, there’s no need to break your spending into categories. It makes for a much more hands-off money-management process.
During the first few months of paying yourself first, you need to find your ideal savings rate. The rate must be robust enough to meet your short- and long-term needs but not so aggressive it interferes with spending on necessities.
3. Take Advantage of a 0% APR Balance-Transfer Promotion
If you relied on credit cards to cover the cost of gifts, entertaining, and travel this holiday season, the bill is about to come due – literally. If you spent more this season than you can afford to pay off in a single monthly payment, consider applying for a balance-transfer credit card before interest payments add insult to injury.
Category-leading balance-transfer credit cards typically charge no interest on transferred balances for 18 to 21 months from account opening. For most people, that’s plenty of time to pay down excessive holiday spending. If you can do so more quickly, go for it – you’re under no obligation to use the entire 0% APR promotional period. And you may incur retroactive interest rate charges on the full term if you fail to pay off your entire transfer by its end.
4. Commit to a Low-Spending Challenge
A no-spending challenge is like shock therapy for your personal budget. It’s a set period of enforced asceticism, the proceeds of which go toward paying off credit card debt or replenishing savings.
Because it’s not good for your credit score to voluntarily miss mortgage, credit card, or utility payments, and because you still need to feed yourself and your family, no-spending challenges lasting longer than a few days are better described as “low-spending challenges.” For the duration of your low-spending challenge, you must spend on essentials, such as housing and utilities, while eliminating all discretionary spending: meals out, entertainment outside the home, leisure trips, clothing, even little things like your morning latte.
The longer your low-spending challenge lasts, the more significant its positive impact will be on your post-holiday finances. Aim for at least a week or stretch for two weeks or the entire month of January.
5. Start That Side Hustle You’ve Been Eying
The world has no shortage of side gigs ready to give your post-holiday finances a lift. Now may be the time to give one a try.
Popular side hustles fall into two broad categories: active and passive. Active opportunities require significant commitments of time and attention, with many easy to scale to full-time status. Passive opportunities leverage valuable assets to produce passive income without a lot of commitment.
Active hustles include:
Passive hustles include:
- Renting out your car on peer-to-peer rental platforms like Turo
- Renting out a spare bedroom on platforms like Airbnb or taking on longer-term tenants
- Renting out a designated parking spot on platforms like Spot
- Offering office space for short-term rentals or longer-term sublets
Active hustles are generally easier to start and end than passive hustles, which can require significant upfront investments or long-term commitments. If you find a particular gig isn’t what you thought it would be, don’t feel bad about quitting.
6. Sell Unwanted Holiday Gifts
Selling unwanted holiday gifts is a one-time move to pad your first-quarter finances. And depending on your loved ones’ generosity and your personal priorities, it could be a lucrative one.
On the resale market, new or gently used durable goods like bicycles and lawn mowers typically fetch a significant share of their retail prices. So can current-year electronics like game consoles and televisions – if you act fast to minimize depreciation.
List your items on heavily used digital resale platforms like Decluttr. If you have lots of lower-value gifts to offload and the weather is cooperative, hold a yard or garage sale.
7. Do a More Extensive “Winter Cleaning”
Why wait for spring to declutter your home? Devote a January weekend to organizing your home’s storage spaces and setting aside things you no longer want or need.
For best results, use a systematic approach like Swedish death cleaning (“Will anyone be happier if I save this?”) or KonMari (“Does this spark joy?”) to judge your possessions’ emotional value. After separating everything you plan to offload, list individual items of relatively high value, organize a yard or garage sale to sell lower-value items, and donate everything else to worthy charities – making sure to keep accurate records for tax purposes.
8. If You’re Due for a Refund, Don’t Wait to File Your Taxes
Your expected income tax refund could dull your holiday spending hangover. Don’t wait to claim it until April. If your tax situation is relatively uncomplicated, you’ll probably have all the necessary documentation in hand to file your taxes by mid-February. Look for early bird promotions like H&R Block‘s offer of zero-interest tax refund advances as big as $3,500.
9. Take a Winter Staycation
Winter is a popular time to take flight, especially for weather-weary residents of colder climates. Alas, a destination winter vacation is expensive compared with the alternative: a winter staycation.
Yes, the affordable ski hill an hour up the road is no Aspen. And the local farm-to-table place you’ve wanted to try for months is not a Michelin-starred Manhattan restaurant with a yearlong reservation backlog.
But all are cheaper than the alternative. That’s what matters most.
10. Use Holiday Gift Cards Before Cash or Your Credit Card
Some gift cards are nearly as good as cash. These include American Express- or Mastercard-branded cards with actual cash value, gas gift cards good at major regional or national station networks, and Amazon gift cards.
If your holiday gift haul includes gift cards like these, use them instead of cash or credit cards until you’ve depleted their balances. With each purchase, transfer an equal cash value into your savings account. If you’ve also received retailer-specific cards, use those as opportunities arise instead of buying something you don’t need just to use them up.
Create a simple spreadsheet to keep track of your cards and their balances. In a few months, take stock of your remaining retail gift cards and consider selling those you’re unlikely to use soon. Even niche cards go for more than 50% of their cash balance on popular gift card resale platforms like Raise.
11. Limit Yourself to One Restaurant Meal Per Week – or Less
Even if you’re not doing an all-encompassing low-spending challenge this year, try to eat fewer meals not cooked at home during the first quarter. Avoiding restaurants and takeout altogether isn’t realistic for everyone, given people’s sometimes hectic work and family schedules. But a single professionally prepared meal per week is a realistic goal.
With ample holiday leftovers frozen for safekeeping and a weekend afternoon set aside to prepare freezer meals to enjoy later, you can likely avoid eating out altogether during the first few months of the new year.
12. Commit to a Dry January
It’s probably not news to you that abstaining from alcohol has significant health and financial benefits. Even if you’re not interested in permanently avoiding alcohol, you can temporarily realize these benefits by committing to a Dry January – a 31-day break from booze popularized by a British public health campaign.
By eschewing just two retail drinks per week at $10 apiece, you can save $80 in four weeks. If you drink more heavily than that or if cocktails are pricier in your area, you can save even more.
Your Dry January can dovetail with other efforts to trim discretionary spending in the new year, such as reducing or eliminating meals out and avoiding costly out-of-the-home entertainment like concerts and sporting events. It doesn’t need to ruin your social life, either. Mocktails and alcohol-free beer are menu staples at abstainer-friendly bars and restaurants these days – though fancy mocktails in particular can be nearly as pricey as boozy ones. To maximize your savings, stick to soda or water.
13. Right-Size Your Cable & Streaming Ecosystem
Like alcohol, sedentary binge-watching isn’t good for your health or finances. And just as you don’t have to swear off alcohol for good to make a positive change in the drinking department, you don’t have to sell your TV and start training for a marathon to give your physical and financial health a lift.
Start by taking stock of your current cable and streaming content subscriptions. Order them from most to least utilized. Then cross out those that:
- Fail to justify their monthly price tag because you rarely or never use them
- You know you can live without, even if you use them frequently
Parting with subscriptions in the latter category is easier said than done, so look for signs you’re ready to move on from a particular service. Despite using it nearly every day, my wife and I canceled a streaming cable subscription out of frustration with persistent technical difficulties. We know we can always replace it with a higher-quality service with equivalent viewing options. But for now, we’re saving more than $40 per month – our costliest video content obligation by far.
14. Skip the New Year’s Gym Membership
There’s no sight quite like a gym on Jan. 2 – flush with the Lycra-clad masses sure that this is the year they complete those fitness-related New Year’s resolutions. Many will stop coming by February, their auto-renewed monthly memberships the only remnant of that fleeting if commendable commitment.
Self-directed exercise is a more convenient, cost-effective way to turn over a new fitness leaf this year – and one that often has better staying power. Depending on your preferred mode of exercise, you don’t even need to leave the house during the dark winter months. At-home aerobics and strength training are easy to do in your living room. Cardio machines like exercise bikes, ellipticals, or treadmills require a bit more dedicated space. Used, they cost the equivalent of two or three months at a high-end gym. But you can also opt for equipmentless at-home workouts. If you stuggle to find new workouts that keep you motivated, you can try Aaptiv.
Outdoor alternatives abound, even in cold climates: winter biking, Nordic skiing, snowshoeing. With proper care over multiple seasons, the one-time investment in necessary gear – used equipment and warm clothing and accessories – pales in comparison to the cost of starting and stopping a gym membership each January.
15. Apply for a Rewards Credit Card That Makes Sense for Your Spending Habits
Used responsibly, rewards credit cards take the edge off the financial impact of everyday spending – as long as you don’t use them to finance purchases you wouldn’t otherwise make.
If your balance-transfer credit card lacks a rewards program, apply for a second card that rewards your typical spending patterns. Say you have a long commute and an ample grocery budget. Opt for something like the Blue Cash Preferred® Card from American Express (read our American Express Blue Cash Preferred Card Review), which earns 6% cash back on the first $6,000 spent at U.S. supermarkets each year and 3% cash back on gas station purchases. Absent disproportionate spending in specific categories, general-purpose cash-back credit cards, like the Citi® Double Cash Card (read our Citi Double Cash Card Review), work well.
They say those who fail to learn the lessons of the past are doomed to repeat it. That certainly includes overzealous holiday shoppers who indulge the same excesses of gift exchanges and revelry year after year. Let this year be different.
The best New Year’s resolution you can keep this year is one that won’t come due until Thanksgiving, when the annual binge of holiday consumption begins in earnest. Resolve to spend well within your means this coming year, guided by a firm holiday budget and easy tips to save money during the holiday shopping season. Sure, you have to put in some work on the front end. But if you’re successful, you won’t need to spend the first months of next year repairing your personal finances.