How to manage money better during the holidays

Holiday spending requires careful financial planning to avoid starting the new year in economic distress.

As the end of the year approaches, many people take time to relax, plan vacations, or travel upcountry to visit family. 

However, holiday spending requires careful financial planning to avoid starting the new year in economic distress.

A lack of proper financial planning often leaves many with empty bank accounts, leading to financial strain in January. 

According to a TransUnion Africa survey, Kenyan households experienced a modest improvement in financial health in the second quarter of 2024. The number of consumers able to pay their bills in full increased due to lower inflation, although household spending decreased.

To enjoy the holiday season without overspending, Eric Musau, Head of Research and Sustainable Finance at Standard Investment Bank, notes the importance of budgeting.

“You have to decide on your spending priorities and available budget. Ideally, start planning early. Borrowing from a Chinese proverb, ‘A journey of a thousand miles begins with a single step.’ Start saving and planning for your expenses as soon as you receive income—every month or even daily,” says Musau.

Budgeting tips

Musau recommends creating a holiday budget by mapping out spending priorities and setting limits. This helps prevent overspending and reduces financial stress.

“At the end of the day, if you can’t afford it, avoid it. This will save you from financial problems in the new year. There are always alternatives to consider,” he advises.

For those traveling or visiting loved ones, Musau suggests clearing pending bills and, if possible, prepaying some expenses before the holiday spending begins.

“Ideally, focus on essentials first before discretionary spending. If you don’t trust yourself to stay within budget, prepayment can help. For example, some schools offer discounts for early fee payments,” he adds.

Avoid borrowing

The financing guru cautions against borrowing to fund holiday celebrations, citing high borrowing costs in Kenya as a deterrent.

“That approach can be risky and is probably unwise unless you’re expecting a windfall to quickly pay off the debt.” 

Money-saving strategies

If financial constraints limit your holiday plans, consider these cost-saving strategies:

Find the best prices

Take advantage of seasonal sales, such as end-of-year offers, when retailers and online shops offer discounts. Compare prices across outlets to get the best deals on your purchases.

Create a budget list

Draft a list of items you plan to buy to track expenses and avoid impulse spending. Categorize your budget into food, decorations, and gifts to stay organized.

Make homemade gifts

Personalised gifts, such as framed photos for grandparents or homemade treats for teachers, are affordable and thoughtful ways to share holiday cheer.

You can enjoy the festive season with thoughtful planning without jeopardizing your financial well-being.