I’m not much of a Halloween person. Never was. I don’t buy decorations and display them, I don’t carve pumpkins, I rarely dress up, but I do enjoy the sugar rush from eating all the chocolate bars leftover from only getting 4 kids at my door on Halloween.
As we approach the holiday season (can’t believe I’m saying this in October), I thought it would be timely to talk about financial planning ahead of it. Holiday seasons, or times of the year when larger expenditures are expected, can be stressful times for households. These costs can put a strain on your finances if not planned for in advance. By managing your spending habits throughout the year, you can reduce financial stress and stay on top of these big-ticket items. Let’s discuss some techniques to help manage spending habits to prepare ahead for those large expenditures.
1. Create a Yearly Budget with Key Expenditure Dates
A good starting point is to make a comprehensive budget that includes both your regular monthly expenses and anticipated large expenditures. Begin by listing all major events that will require additional spending, such as Christmas holidays or other milestone events, vehicle maintenance and repairs, and home maintenance and repairs.
Once you've identified these, add them to a yearly calendar. This will help you spread the financial load over time instead of scrambling to find money last minute.
2. Establish Savings Buckets for Big Purchases
Once you’ve identified key expenditure dates, start building “savings buckets” for each of these large expenses. A savings bucket is a separate account or savings plan dedicated to specific goals, such as a holiday fund or vehicle maintenance fund. Automate your savings by setting up small regular transfers into these accounts. By saving throughout the year, you’ll have the money ready when those expenses come.
For example, if you expect to spend $1,200 on Christmas, you can start setting aside $100 per month beginning in January. By December, you'll have the full amount without affecting your budget during the busy holiday season.
3. Track and Cut Down Non-Essential Spending
One of the most effective ways to free up money for big expenditures is to track your spending and reduce non-essential expenses. Small, everyday purchases—like coffee, dining out, or impulse buys—can add up over time. Use budgeting apps like Quicken, Monarch, PocketGuard, Good Budget or YNAB (You Need a Budget) to track your spending. Once you identify where your money is going, decide where you can cut back. Redirecting those savings into your “big purchase” accounts will help you prepare for upcoming costs.
4. Plan Ahead for Irregular Income or Unexpected Costs
Not all costs are predictable. Vehicle breakdowns or emergency home repairs can arise unexpectedly. Building an emergency fund can help you handle these unplanned costs without derailing your overall budget. Aim to save 3-6 months' worth of living expenses in your emergency fund, so you’re prepared for any financial surprises.
Additionally, if your income fluctuates due to commission-based work or seasonal employment, it’s essential to be extra cautious. Make sure you’re saving more during higher-income months to cover expenses during lower-income periods.
5. Evaluate Your Subscriptions and Recurring Expenses
Another area where people tend to overspend is through recurring subscriptions such as streaming services, apps, and memberships. Review your monthly subscriptions to determine if you’re getting full value from them. Cancel any that are underused, and redirect that money into your savings.
Based on 2023 Statistics Canada and Quicken data, personal spending typically falls into the following major categories as a percentage range of income:
Housing (30-35% of income) Housing costs remain the largest personal expenditure for most households, including mortgage or rent, utilities, property taxes, and maintenance.
Transportation (15-20%) This category includes vehicle purchases, fuel, maintenance, and insurance. Public transportation costs also fall under this category.
Groceries and Food (10-15%) The cost of food, both groceries and dining out, takes up a significant portion of most budgets. Inflation has caused food prices to rise meaningfully since 2021, making this category even more important to monitor.
Healthcare (5-10%) Healthcare costs can vary, but insurance premiums, prescriptions, and medical care are significant expenses for many individuals and families.
Entertainment and Leisure (5-10%) Spending on leisure activities like vacations, hobbies, dining out, and entertainment has increased, especially with travel and events picking up after the COVID restrictions eased.
Debt Repayment (10-15%) Many people spend a portion of their income on paying off debt, including student loans, credit cards, and personal loans.
Savings and Investments (5-10%) A growing number of people are focusing on building their savings and investing for the future, although this varies widely depending on income level and financial priorities.
Effectively managing your spending habits ahead of time is key to avoiding financial stress when large expenditures arise. By creating a yearly budget, establishing savings buckets, cutting back on non-essential spending, and planning for the unexpected, you can stay in control of your finances and be better prepared for significant expenses. Additionally, being aware of the main personal spending categories allows you to adjust your budget and savings goals to align with your lifestyle and financial priorities.
Now that should give you a rush you can enjoy that’s not related to sugar.