The holidays are approaching quickly as they always seem to do once the first leaves change from green to shades of red, orange and yellow. And with the holidays comes expenses. Between gifts, meals, trips and decorations, chances are your expenses are about to go up.
To help us all plan for the upcoming holidays, GOBankingRates asked Grok the following question: “I need your best tips on how to budget for holiday expenses! What have you got for me?”
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Here’s what it recommended.
Set a Total Budget
It’s hard to stick to a budget if you don’t have one, so Grok said to decide on a realistic amount that you can spend on the holidays. This includes gifts, travel, food, decorations and anything else that falls into the “holiday” category.
Grok said that a common guideline is to allocate 1% to 2% of your annual income to holiday expenses but to adjust based on your personal financial situation. This means if you make $100,000, you should spend between $1,000 and $2,000 to cover all of the holiday costs.
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List All Expenses
Grok put this as No. 2, but you may want to do this before you set your total budget or do the two simultaneously so you can adjust as you go.
Break down the expenses into categories and estimate the cost of each item or event. Don’t forget to include things like flights, food, entertainment and anything else that falls under the holiday umbrella.
Start Saving Early
Even though you may be reading this in October, it’s really never too late or too early to start saving. Grok said that you can set up a dedicated savings account or contribute to a sinking fund to save up for holiday expenses.
Saving a small amount monthly, even $50, can go a long way toward covering these costs. If you start saving $50 a month in January, by December, you’ll have $600.
Track Spending
As you spend the money you’ve put toward these expenses, make sure to track where the money is actually going. Budgeting apps like YNAB or even just a simple spreadsheet will allow you to monitor your purchases and stay within your limits, according to Grok.
Prioritize Spending
Make sure to put money toward the things that matter most.
“If family time is key,” Grok said, “then cut back on expensive gifts and allocate more towards travel or hosting.”
Shop Smart for Gifts
Grok gave three recommendations for how to shop smart for gifts:
- Make a per-person budget when you make your gift list.
- Keep an eye out for deals during sales or shop secondhand.
- Go with homemade gifts or experiences to keep costs lower.
Cut Travel Costs
If you’re traveling for the holidays, Grok recommended booking flights and accommodations early to lock in prices and avoid any last-minute price hikes.
You can use reward points or miles or consider driving to keep costs lower. You can also consider hosting at your house or somewhere local to avoid travel costs altogether.
Plan for Next Year
Among a few other recommendations, like avoiding debt by paying with cash or debit cards and using cash back and rewards, Grok had one final suggestion.
“After the holidays, evaluate what worked and what didn’t. Start saving for the next season in January to spread out the cost,” it said.
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This article originally appeared on GOBankingRates.com: I Asked Grok How To Budget for Holiday Expenses — Here’s What It Said
