The holidays are around the corner, the time of year when things get a little crazy and, unless you’re careful, all that hard work you’ve done on cutting back spending can go out the window. But don’t worry! With a well-laid plan for spending these holidays, you can save yourself some moolah—and some anxiety!
Why not start now? It won’t take more than 15 minutes here or there to come up with your holiday spending plan. The below section will calculate your target "spend rate”—the amount that you can reasonably afford this holiday season—and teach you how to adjust as you go along so that you stay within that target.

Your assignment:

1. Make a list of all the people/events/hostess gifts you will need to buy presents for. Make sure you leave a couple spaces open for all those last-minute or accidentally forgotten friends!

2. Quickly go down your list and write down an amount that comes to mind for each person’s gift. Don’t spend a lot of time fretting over the exact amount (perhaps base it on last year’s amount or on the gift you already have in mind for them); the important thing is to commit something to paper. Writing it down will help you become committed to this process.

Note: To obtain maximum value from this exercise, hand-write your list with a pencil or pen on a piece of paper or in a notebook so it’s easily accessible. By working with pencil and paper, you will have established a “permanent” relationship with your numbers, which will help you retain them in the future. While many of us may be tempted to document our list in a computer, you will not get the same benefit as you do when you actually write out the information.

3. Once you’ve entered an amount for each gift, total the amounts and see what the total expense will be.

4. Now ask yourself if that total expense number seems reasonable based on your available funds and/or funds you’ll be able to save between now and then. Remember, the idea is not to use credit cards where you will run up more debt than you can handle.

Note: Whatever amount you save, it is important that you actually place the money in a separate account or even an envelope so you can truly benefit from this process. What behavioral economists refer to as ‘mental accounting’ – where we ‘keep track’ in our heads of ‘separate’ funds that are meant for specific purposes – doesn’t work for most people. And, yes, that means when it’s time to go shopping you take your envelope with you and leave the credit cards at home!

5. Go back to the list now that you know the total expense number and see if there are any changes you want to make, then make sure to add them all up to re-calculate your new “Spend Rate” Total.

Regardless of what your spend rate is, remember that it’s the amount that you can afford this holiday season. Don’t ever worry that it’s “not enough!”

6. Keep the list so you can refer back to it.

7. You will then record how much you actually spent as you make your purchases. As you cross items off your list, you want to record each amount to see if you end up spending less or more than you previously forecast. Not to worry, this happens all the time in real life.

It really doesn’t matter if you spend more on one item and less on another than you previously projected. The vital lesson is that if you’ve spent more than your first projection on a single item, then you need to decrease the other amounts accordingly to stay within your target spending range. Otherwise you have defeated the purpose of mapping out your target spend rate.

Ideally you may spend less, which means one of two things: 1) It leaves you some extra to spend on the other gifts or 2) You can stick with the same amount on the others and spend less overall!