It’s the time of the year when budget-minded people start thinking about how their finances will accommodate the extra expenses of the holiday season.
Actually, the really budget-minded people have been preparing financially for the Christmas season all year long. Divided over twelve months, the holiday expenses are barely noticeable.
If you’re in debt, then chances are good that you haven’t been saving all year for Christmas.
In fact, if you have debt, you might be tempted to say, “What’s a little more debt?” when it comes to holiday spending. Don’t do this! Don’t lose momentum in your debt payoff and definitely don’t go deeper into debt in the name of the holidays!
This is why you need to think ahead and budget for Christmas now.
What holiday expenses do you anticipate?
Think through past Christmases and write down what you plan to spend money on. Here are some common categories to help spark your memory.
- Cards— Include price of cards and postage
- Travel— Include all expenses of your trips
- Gifts— Who are you planning to give to? Immediate family, extended family, neighbors, teachers, friends, co-workers? Include:
- Stocking stuffers
- Wrapping supplies
- Shipping
- Treats— For your family and to share
- Meals— Are you hosting a meal or attending a holiday potluck?
- Decorations— Do you buy a live tree?
- Charitable Giving— Holiday-related giving
- Other— Does your family have another tradition that involves an expense?
For gifts, I recommend writing out an inclusive list of everyone you plan to give gifts to, whether they are large or small expenses. Even though this is an expenses list, I would still write down people who I’ll be giving handmade gifts to. Then you can happily put a big $0 next to those.
Prioritize your list
Once you have your list, start prioritizing it. You probably won’t have the time or money to do everything on your list, but there will be some items that are more important than other things.
For example, it would be nice to give a hostess gift to Great Aunt Mildred, but if push comes to shove, you’d probably rather get your daughter a doll and some new pajamas. Or, while it would be nice to bring treat plates to all of your neighbors, it’s more important to pay for gas to get to grandma’s house for the family dinner.
I like to prioritize in three tiers.
The “gotta” expenses are the bare essentials. They include the gifts, decorations, or food that is most important to me and my family.
The “wanna” expenses are not absolutely essential for a happy holiday, but they are pretty standard for our family and we would really like to do them.
The “would be nice” expenses are ones we’d enjoy if we had the time and money, but are really just extra.
Even though it would be nice to do everything on your list, both time and money will pose limitations. How you prioritize is completely personal. By prioritizing your list now, you’ll make sure that the most important traditions are included before you spend money on things that don’t matter much.
How much will you have available spend?
If you have been budgeting and tracking your expenses for more than a year, it’s easy to go back and look at previous years to see what you’ve spent. But what if you’re new to budget and tracking expenses? That’s when it gets tricky, but that’s when the need is the greatest!
If you haven’t budgeted (or kept track of expenses) for Christmas in the past, then you probably don’t have any idea how much you actually spend on the holidays. In fact, you would probably be pretty shocked to see how all those little (and big) purchases added up.
Instead of choosing an arbitrary number or even an amount that you think you’ll need, look at what you have available to spend. Maybe right now you have $0 in your Christmas fund. There’s no better time to start saving than now (well, besides yesterday, but we won’t dwell on that).
In the weeks before Christmas, you can add to your Christmas Fund by cutting costs and earning extra.
What costs can you cut between now and Christmas to contribute to your Christmas fund?
Here are a few ideas:
- Don’t spend any money (or drastically reduce spending) on unnecessary categories like clothing and entertainment. What are some expenses that you can cut quick to free up some cash?
- You could even plan a no-spend month for November and put all the money you save toward Christmas.
- If you haven’t tried to negotiate (or eliminate) your regular bills, now is a great time to lower your bills.
- Stop eating out. Pack your lunch and cook simple meals from scratch.
What can you do to earn some extra income between now and Christmas?
- Sell stuff that you don’t need or have sitting around. This is a great season to put the toys your child has outgrown on Craigslist, Facebook, or Ebay. Not only are you decluttering, and earning extra income for your Christmas fund, you’re helping out other parents who are looking for cheaper-than-new gifts for their children.
- Sell your specialty. Do you make great pies or rolls? Maybe you make cute hair bows or personalized ornaments. Try selling on a local Facebook group or to friends and neighbors.
- You could offer babysitting for friends who would want to go Christmas shopping together without their children. Set a block of time on a Saturday and offer your services to several families. With lots of kids, they’ll have fun playing together, making it easier on you too!
- Do you have a job that offers overtime? Could you pick up an extra shift?
- Here are some more ideas for earning extra money that you can get paid for quickly.
Simplify
Accept that it’s okay to simplify. It’s okay if this Christmas looks different than in years past.
Decide that your financial goals like getting (or staying) out of debt are more important than giving expensive gifts and having the perfect table spread.
Realize that those who love you would rather have you get closer to financial peace than have a costly gift from you. There is nothing more awkward than getting an expensive gift from someone who you know can’t afford it.
How About You?
I’m excited to hear your ideas and experience in managing your holiday budget!
- Do you start saving early for Christmas?
- How do you decide on and prioritize your Christmas budget?
- Has debt affected your Christmas budget?
This post was originally published 19 October 2015, but has been updated to be included in the Frugal Festivities series.
Next in the series:
Day 4: How to Save Money on Christmas Cards
Growing up my parents put Christmas expenses on credit and then spent months paying it off. I remember how much stress that caused for them. So before we got married my husband and I decided that Christmas is always cash. Our first Christmas we had $20. We still had a great Christmas. Now we set aside money every month for Christmas. Due to some expensive repairs to our home this year we cut our budget in half for Christmas. It will still be a great year.
We have a christmas club through our bank and set aside a portion of that for christmas and use the rest for debt pay off or for one big purchase that we have saved all year for (such as a tiller for our garden to make it easier on my hubby who has health issues). This year we used the bulk of it to pay off debt and cover college graduation expenses for our daughter.
I think where you talk about people picking an arbitrary number of what their budget for Christmas *should* be is a lot of people’s problem. Last year I tracked every single expense we had for Christmas. I had a set budget in mind but I did not do a good job of making sure I stuck to it. I could not believe how much money we spent in the end! My suggestion to someone would be to do this, even if you do not think you need a budget, and I am sure you will find a way to cut expenses once you realize the ridiculous things you are spending money on.
This year I started picking up gifts through the year when I spot things on clearance. Honestly, I would usually just give them to the kids right away bc who can pass up the 70% toys at target? So this year I’m buying and hoarding as I find things. My best steal so far where $6 thomas trains at barnes and noble! I also got a quilt for twin bed with snoopy on it for 9.98. My kids are small enough that I can hide the stuff easily. These purchases come out of are spending money.
I do budget for christmas though. Last year we had $600 for everything and we do buy for some extended family. I am not always great at sticking to it. 🙁 My husband and I don’t always exchange gifts. Last year we bought a new kitchen table for $200 to replace our deteriorating hand me down. It was more of a family gift.
I think one of the hidden expenses of christmas for us is eating out more often because we are more busy that time of year.
Thank you for sharing such a detailed account of your budgeting and expenses. It’s very insightful. One thing I would suggest is to assign a higher priority to the way you save for your kid’s college expenses. The oldest of our three kids had to attend a small private college because of orthopedic issues. (The orthopedic problem started when she was 11 — we spent untold sums taking care of it with operations, doctor visits, wheelchair, etc. Her college was about 50,000 per year. Then the next child who was valedictorian of our large high school was also a talented athlete, wanted to go to an even more expensive private college (and how can you say “no” after some of the sacrifices she made growing up with her sister’s problems)? Our kids are all 2 years apart so that meant once the span of 8 years of college began double tuition kicked in by year 3 through year 6. Anyway, thank goodness our son, the youngest, picked a state school. In the years of double tuition, FAFSA said that we could afford the tuition without any assistance. The double tuition was the same amount as my husband’s net paycheck. Absurd! I’m afraid the financial strain contributed to the demise of our marriage. Please, please be prepared for this wallop waiting down the road!
Oh that’s painful Raleigh! We will boost our college savings when our debt is paid off. It’s kind of a catch-22 that we’re not saving for their college because we’re still paying for ours. And there’s retirement too…. Thanks for sharing your experience.
We’ve (I’ve) tried to stay around $300 for everything the last couple of Christmas’s, however I ended up going over a smidge – and a lot last year. So this year it’ll be a $400 Christmas. Me and hubby never exchange gifts (our gifts are home upgrades throughout the year), we have 1 son, a large extended family that lives far away, not too many social obligations where we’re at and we give some money to a soup kitchen nearby. Shipping gifts/gift cards can get pricey so it really has to be accounted for in our budget!
But I buy our wrappings and cards at the dollar store, or reuse packaging from last year, keep our menu to only include Christmas Eve and Christmas day as our feasting days, buy a small amount of decorations after Christmas to use the next year and also the day after Christmas I usually get up and out to Target early to buy birthday presents for our son at markdown prices. OH! And December we also have my birthday, my husbands birthday AND my mother-in-laws birthday too, so those are accounted for in our final $400. Phew. I’m exhausted and we’re not even there yet! Thanks for the article, you reminded me I have to start getting my duckies in a row!
It sounds like you’ve got a good plan Melanie! Thanks for sharing! Buying on clearance for next year (and birthdays during the year) is a great way to save.
We have always had a budget for Christmas and birthdays. My husband (and mother in law’s) love language is gift giving, so we have to set a clear budget for those things or else we are in trouble! We’ve already set the budget for this year and plan to stay well within that budget. While we don’t save for Christmas every month, we usually have an extra paycheck in the fall that is used for Christmas purchases. It’s just easier to know you’re done when the money is gone! And you just don’t look any more after that. It’s always been freeing to me to know (and remember) what we have spent every year for Christmas and we pretty much spend the same every year!
We’ve never really had a Christmas budget. But this year im trying to change that! We always end up spending a lot more than we wanted too and im sure a budget would help a lot. Thanks for the tips!
We don’t really have a Christmas budget, though this year I have been saving some of our credit card rewards points to buy gifts on Amazon for our kids. Both sides of our family give so many things to our kids that we usually don’t add much on our own. It might sound terrible, but we don’t see the point of adding even more toys to the pile and rather spend money on a Christmas holiday in a nearby city (the hotel is paid for by our in-laws who come to visit us, but we pay for our meals).
Our families are also usually pretty generous with gifts to us as they know we are working to pay off debt and not spending much on ourselves. They don’t expect anything in return, but I feel bad when we don’t get them something – this year I am going to do photo shoots of the kids and hopefully do something homemade for each set of grandparents.