We’re gearing up for the holiday season, which for many families means adding celebrations into the budget. We want you to enjoy both the holidays and the months afterwards, so we’ve put together your game plan to be smart about holiday expenses.
How to Prepare for Holiday Spending
Budgeting for Christmas, Hanukkah, and other December celebrations starts with a holiday spending plan.
Plan a gift list as far in advance as possible. The number of people on your list affects how much you can afford per gift. With more people depending on online shopping due to coronavirus, it’s also smart to get check off your shopping list earlier than usual to add a cushion for shipping time. Some retailers, especially small businesses, are offering deals before the Black Friday wave this year to try and circumvent pandemic-related postage delays.
Holiday shopping falls outside of your typical monthly budget, so it can be helpful for some families to keep the money separate, too. You could even set up a separate bank account to hold the money you’ve allocated as your holiday spending funds.
Next, it’s time to use those funds for maximum effect. A few holiday budgeting tips can help you stick to the plan.
How to Create a Realistic Holiday Budget
It’s easy to get swept up in the spirit (and, let’s be honest, the marketing push) of the season. Making a holiday spending plan allows you to be generous without blowing your budget.
How much to spend on Christmas gifts per person
The average American spent roughly $942 on holiday gifts last year. But don’t feel you have to keep up with the Joneses — set a total holiday spending budget that feels doable to you. You might plan out your gifting list like this:
- Set $50-150 per child. Try the 4-gift rule for family members: something they want, something they need, something to wear, and something to read.
- A $30-75 limit can be good for family gifts outside your household. This is also a good limit for close friends, who you may think of as honorary members of the family.
- Your significant other deserves some special recognition of their place in your life. Around $75 can be a good rule of thumb, but as always, a thoughtful gift counts more than the price tag. Choose a limit that’s comfortable — and discuss spending limits with your partner in advance to avoid an awkward disconnect.
- Your larger friend group (e.g., the group chat) might not be a big gift-giving group. If you usually do a big exchange and budgets are tight this year, suggest a Secret Santa instead of everyone buying individual gifts for each friend. Here’s an online Secret Santa to make giving safe and healthy:
- Coworkers can pose a tricky gifting situation, especially if you’ve all been working remotely for months. An office Secret Santa works best if gifts have a modest spending limit — $20, tops. And feel free to bow out entirely (although if your office culture leans festive, it could be thoughtful to send a nice holiday card).
Don’t forget extra gift supplies
Wrapping paper, decorations, and the marzipan for your famous cookies all factor into your total holiday budget. Little expenses can add up, so make sure they’re accounted for on your list, from the cost of a Christmas tree and wreath to postage for every address on your greeting card list.
If you notice expenses getting out of hand, prioritize and adjust early. It’s better to trim expenses while you’re still in planning mode than lie awake stressed after you’ve already trimmed the tree.
Keep track of your spending as you go
Overspending happens to the best of us. You meant to spend $30 on a gift for your sister, but the perfect gift is just a little over, say $40, once you add tax. Or you and your partner both bought a gift for the same person, and with coronavirus, who wants to make another trip to return the duplicate?
A little extra here and there can snowball into a way bigger credit card bill than you planned. Set up a shared document or spreadsheet with your partner to track who bought gifts for each person on the list, what they spent, and how much you have left for holiday shopping.
Tips and Tricks to Avoid Overspending
Staying within a budget can be tough, especially if you’re not used to tracking every dollar. Make it easier with these holiday budgeting tips:
- Adjust expectations. Coronavirus may have changed many people’s plans this year. If you’re watching your budget or planning to skip traveling to visit loved ones, break the news early.
- Comparison shop. Looking out for Black Friday and Cyber Monday deals can help you save money. Thrifting or exchanging handmade gifts can also lighten your holiday budget.
- DIY your decorations. Pinecones and paper snowflakes make cute, low-cost decorations. Print free card templates at home or check dollar store selections instead of springing for expensive designs.
- Try a new tradition. Many of us will celebrate a distanced holiday this year, but it can still feel warm and festive. Game or movie nights, making cookies and cocoa, and touring neighborhoods to see Christmas lights can be special family time. If a local food bank or other charitable organization you support takes safety precautions that feel comfortable to you, volunteering may also be an option.
Your Post-Holiday Spending Review
After the holidays are over, assess your spending. How do your actual expenses compare against your intended budget?
If you stayed within budget or close to it (give yourself 5-10% leeway), consider that a job well done. Look for areas to fine-tune your budget next time around. If you had to shop for a last-minute gift and juggled other gift budgets to make room, or if impulse purchases took you slightly over budget, you can tweak the plan for how to budget for holidays next year.
If you completely blew your budget, you’ll need to do some more heavy lifting. Taking steps to prevent another overspending season now, while your holiday spending tracker is still fresh, could go a long way. Make a plan now to cut back your spending in the new year and hold yourself accountable. Maybe that means you need to start saving earlier in the year, as well as making efforts to slash your spending.
After the holiday season, focus on paying off any remaining credit card debt. Read more about how carrying debt can affect your wellbeing in our guide here, or find out how a Home Value Investment could help you pay down your debt for good here.
Generosity is a hallmark of the holidays, but your loved ones don’t want holiday celebrations to cast you into debt. Think of holiday budgeting as its own kind of gift, giving loved ones the assurance that January debt won’t chase away your holiday cheer.