Budget for the holidays and beyond

After today, there are only 13 more Saturdays left until Christmas. Shocked that 75 percent of the year has already flown by? Panicked that there’s little time left before the shopping and gift-giving mayhem of the Christmas, Hanukkah and Kwanzaa seasons begins?

Before you join the shopping fray, consider some statistics. In a poll conducted last holiday season, Consumer Reports found that nearly 40 percent of Americans admitted to spending more than they’d budgeted. Even worse, in another survey conducted by Harris Interactive, 57 percent of adults with children said they’d willingly go into debt to make their kids happy. And worst yet, Consumer Reports found that 10 percent of shoppers who had used a credit card the previous holiday season had yet to pay off that debt a year later.

Thanks to holiday bills such as these hanging around like Aunt Betty’s fruitcake, credit counseling agencies will see 25 percent more of you come January and February of next year, according to ABC News.

If you love celebrating the holidays but don’t love the idea of all that stress and debt, here are some tips and rules of thumb for budgeting your way through this holiday season.

Rule #1. As Scrooge-like as this may sound, holiday shopping isn’t essential. The holidays and consumerism have become so culturally intertwined, and we are so seduced by the music, the commercials, the decorations and the atmosphere of it all, that we tend to forget that it’s purely optional. If your financial house is in disorder, don’t succumb to the frantic, manic rush. The people that really count in your life aren’t going to suddenly stop loving you because you’ve economized. As we’ve seen in the statistics above, the holidays can be detrimental to your finances for a long time to come. The holidays mean many things to many people, but I can say confidently that it’s not supposed to be about that.

Rule #2. Never go into credit card debt or dip into emergency funds for holiday spending. Don’t let holiday shopping put you into credit card debt. And don’t say I didn’t tell you so.

Rule #3. Make a holiday shopping budget and stick to it. Whether with a budgeting software program, a spreadsheet or pen and paper, determine how much income you’ll have between now and the end of the holiday-buying season. Carefully calculate all the essentials that must be paid for between now and then: mortgage, groceries, utilities, etc. The difference between your net income and these essentials is your surplus and the fund from which your holiday shopping will be taken. Everything non-essential that you purchase between now and the holidays — pumpkin spice lattes, new shoes, going to the movies — will cut into that surplus and leave you less for holiday shopping. It’s that simple. Be sure to keep track of all your actual expenses and continue doing your budget math, because overlooked and unforeseen bills will come up.

Rule #4. Budget year-round. My best advice may be too late and that is to budget throughout the year. To help you do that, I’ve provided some benchmark percentages (see box) for all expense categories. Everyone’s financial situation is different, of course, but these rules of thumb for allocating your income are worth considering by anyone interested in keeping their budget on the right track.

It may be helpful to know that many financial planners prescribe not spending more than 1.5 percent of your annual budget on the holidays. If you haven’t been budgeting with these benchmarks in mind, don’t fret. You can start today. Broke and in debt is no way to pass the holidays, and certainly no way to ring in any New Year. With a budget and without financial stress, you’ll enjoy the holidays far more — not to mention the rest of the year. Now that’s a gift that keeps on giving!

Budget guidelines

Housing: 25%-28%

Mortgage payments (including property tax and home insurance) or rent

Utilities: 5%-10%

Phone, electricity, water, Internet, gas, garbage and recycling

Transportation: 10%-15%

Gas, insurance, repair and maintenance, license, registration or public transportation passes — does not include your car payments, which goes into the Debts category

Food: 5%-15%

Groceries and restaurant meals

Savings: 5%-10%

Emergency funds and big-ticket items

Retirement: 10%-15%

401(k), pension plan and other employer retirement savings plans; IRAs; other investments; long-term care insurance

Medical: 5%-10%

Health, disability and long-term care insurance, medical bills and copays

Debt repayment: 5%-15%

Credit card debt, student loans, car payment, anything else owed minus your mortgage

Personal, entertainment and recreation: 5%-15%

Vacation, gifts, satellite and cable television, magazine subscriptions, gym membership, movies and music, clothing