The holidays can get expensive, especially if you’re used to tackling them without a budget. Even though stores give us early reminders – now as early as reindeer mixed in with pumpkins around Halloween – many people don’t plan ahead. Without a budget and with no margin in their personal finances, they end up going into credit card debt at 20%-30% interest, making the holiday spending The Nightmare After Christmas that won’t quit. Below, we share 10 tips on making and sticking with a holiday budget to help you avoid a New Year’s debt hangover.
Be Realistic with Your Holiday Budget
Make a reasonable budget to begin with. One that you can afford. If this is your first year budgeting for the holidays, it’s likely to look a little leaner than in years past. While you may feel the pinch of the budget on your spending, it doesn’t have to dampen your festive spirits. There are plenty of fun, frugal holiday ideas to keep traditions in your family while also allowing you to stick to your budget.
If the holidays are a BIG DEAL in your household, consider creating a sinking fund for your holiday season. Start saving early, but stick within your budgeting guidelines, whether you have a standard 50/30/20 budget, or have adjusted the 50/30/20 budget to your personal situation.
If you’ve never done a budget before, we’re here to help! We have a step-by-step budgeting process to help you make your first zero-based budget. You can also check out our budgeting expenses page that breaks down common expense categories, including holidays. Our budgeting station houses all our budgeting resources to help you as you make and adjust your first budget.
Plan Your Holiday Festivities Ahead of Time
Plan your holiday budget ahead of time so that when Santa Claus is coming to town, you’re ready for him.
Plan not just for holiday gifting when you’re doing your holiday budget, but for the entire holiday season, including
- groceries for the big holiday meal
- travel expenses to get to the big family celebration or for your holiday vacation
- holiday events such as pictures with Santa, North Pole train excursions, ice skating, sledding, etc.
- seasonal greeting cards
- decorations, including lights, trees, ornaments, and the Elf on the Shelf if you dare
Sit down with your spouse and family and plan together, so that no one’s surprised come Christmas Eve. Being aligned with your spouse on the holiday budget and tackling the season as a united front can prevent one or both of you from ending up with coal in your stocking.
Reduce Impulse Buying Opportunities
I found an amazing holiday hack this year for our annual Selfish Day: stay out of physical stores. For the past few years, we’ve busted our holiday budget each season. This November, I realized why. When I go into physical stores, I get distracted by all the items I see in person that I overlooked on the website. I don’t need them and they weren’t important enough to come to mind when I made my list. But once I’m in the store, the impulse to grab it and throw it in the cart since it’s only $5 is strong. Before I know it, those little additions add up to a hundred or more dollars over our spending budget.
This tips counts for online stores too, because Amazon is an even bigger culprit in our house than Target.
Leave all purchases in online carts overnight or for 24 hours prior to purchasing them to make sure you still want them the next day and that your budget can afford the checkout.
Do the Bulk of Your Holiday Shopping at the Same Time
Not only did I stay out of retail stores this Black Friday, I did all my holiday shopping in one sitting. I built my lists ahead of time over the previous several months, then built the online carts simultaneously across Amazon, Wal-Mart, Target, and other independent websites.
If you host a large holiday meal, include your groceries in a pickup order as well. You don’t have to buy them in November for Christmas, but it’s good to have an accurate idea of what all those casseroles, hams, and pies are going to cost as they can bust the budget when you’re on the last leg of your holiday marathon.
Once you’ve built all the carts, add up the totals with taxes and shipping, though I do my best to finagle my carts so that I meet minimum requirements for free shipping. A lot of times, different vendors will have the same product for the same price or within a few cents. If it saves you $6+ on shipping, it’s worth getting it at the other store.
I use a simple Excel or Google Drive spreadsheet with two columns, listing the vendor names in one column and the cart total in the other.
If you’re planning on going into the stores, you can still make shopping lists and price out what you’re going to get at each store. It may take a little more time up front, but it can save you a lot of time playing Sophie’s Choice on the back end when you’re over budget and deciding what you have to return. It can also save you from the evil eye from your spouse when you come home with a literal bullseye on your shopping bags.
If you’re planning on travelling, include the costs for airfare, Airbnb/hotel, gas, food, etc. on your spreadsheet as well. Ditto on the tickets and travel expenses for holiday events.
Make a List and Check It Twice
When you add up all the cart totals, compare it against your budget.
If you’re under, congrats! You’re already better at this holiday budgeting than we are.
If you’re over budget, go back and prioritize. Ask yourself:
- Which expenses do you really want to spend on?
- What can wait until next year?
- Which items or experiences will bring the most joy/entertainment for their costs?
- Does your spouse or significant other agree? If not, which ones can you compromise on?
Removing items from carts can be hard. We have 15 items saved for later in our Amazon cart and 5 items already on the list for next year’s Black Friday shopping that didn’t make the budgeting cuts this year. But I’d rather had something to look forward to next season than be scrambling for the rest of the month, trying to find money to cover our overspending.
Let It Goooo… Back to the Store
Don’t be afraid to make returns, even if you stayed in budget. Just because you can afford something doesn’t mean you need it or enjoy it.
I had a $120 Dosaze ergonomic pillow on my 2023 Black Friday shopping list for six months. I was so excited to get it, especially when I found an online 15% off coupon to get a discount. For almost a week, I waited eagerly for it to arrive. When it came, I immediately pulled it from its packaging to let it air out. That first night, I snuggled my head into the contoured foam material and sighed happily. Then I rolled over onto my back to watch our nightly episode of The Expanse and winced. The cut out for back sleepers jabbed me like a rod in the back of my neck.
The pillow, I was disappointed to find out, was super uncomfortable.
Six months of waiting and anticipation only to find out it sucks.
I gave it a few more tries over the next week, then emailed the company to start a return.
The pillow was within our budget, but it wasn’t what I wanted after all. No way am I keeping a $100 pillow around that no one is going to use. I’d rather use that money to buy a different pillow, or save it toward our FIRE freedom goals.
Leave everything unopened until you’re completely done shopping, as not all products are returnable once opened. I like to do bulk returns to cut down on errands. Keep track of return windows so you don’t miss out and get roped with that $100 pillow not even the dog wants to use.
Buffer Your Holiday Budget
This is a do as I say, not as I do tip as I’ll admit, I need to work on getting better at this one. This year, we had a whopping $1.98 buffer remaining in our holiday budget, which doesn’t leave much room for “Oh, I forgot to get Sir So-And-So a gift” or “Ohhhh, look at that Harry Potter ornament!”
Having to scramble at the end of the month to readjust the budget for a last minute purchase always turns my anxiety up to 11. Having some buffer left after planned spending not only gives you margin, but it allows you to stock up for our favorite frugal holiday tradition ideas during the after holidays clearance sales.
Having this buffer also leaves room for opportunities that come up that weren’t originally planned for, such as
- invites to holiday parties
- discounted tickets for a special event
- a present that screams Sir So-And-So to you
- an opportunity to be generous and help someone in need this holiday season
We are fortunately homebody introverts who don’t like to party, and we have separate gifting and charity budgeting expense line items, but things always seem to creep up the closer you get to Christmas.
If you don’t use up your buffer, reallocate it at the end of the season for your big freedom FIRE goal, or put it in a sinking fund for next year’s holiday season.
Check Your Credit Card Rewards Points
We save up our credit card rewards points all year until November, then cash them out to help supplement our holiday budgeting. (Okay, fine, we spend it all on ourselves on Black Friday. But it’s the same principle!)
You can often redeem credit card rewards points for a variety of different gift cards you can give as holiday presents. My mom does this. You can also use them to help supplement your holiday budget for travel, groceries, or other planned expenses.
While we don’t want you going into credit card debt during the holiday season, we’re more than happy to use the perks of credit cards instead.
Protect Yourself from the Ghost of Christmas Past
If you haven’t worked with a budget before, know that it’s probably going to be hard to stick to your first one this year. Budgeting is like riding a bike. It’s a learned skill that comes after several scraped knees and a few crying sessions in the driveway.
If you’re a budgeting virgin or if you know you overspend (guilty), consider leaving the credit cards locked away this year and remove the online shopping apps from your phone, especially once you’ve hit your budgeting limit.
I’ve said it before and I’ll say it again: the worst thing you can do is go over budget and finance it at 30% interest on a credit card. Then the Ghost of Christmas Past follows you around all next year, and it isn’t Casper the Friendly Ghost, it’s the antagonist from the next Ghostbusters movie.
Be Honest about Your Holiday Budget with Your Family
This might be one of the most important takeaways. It’s one that has worked wonders for us, even though family met it with some resistance at first.
You don’t have to share your entire financial story with every relative you spend the holiday season with. In fact, we beg you not to. But if your holidays will look different this year thanks to being on a budget, let everyone know up front. Fire a warning shot across the bow so you don’t end up like Captain Jack Sparrow, with a bunch of dudes in wigs and tight pants blowing holes in your budgeting ship.
Tell family members upfront if you won’t be gifting as much this year, especially if they expect a certain amount of excess.
If they are upset, hear me clearly: that is their issue, not yours. Do not let their disappointment guilt you into spending more. They aren’t the ones who have to suffer the debt hangover come January. You are.
A Harris Poll survey for SunTrust Banks found that almost 70% of Americans would rather skip exchanging gifts during the holiday season. Some 60% would prefer to spend more time with family and friends instead.
Nothing is stopping you, except that fear of guilt. Let this be the year where you break free!
If your family and friends value quantity of gifting over time spent with you or your dedication to your financial future, that is a bigger issue that needs to be addressed. No amount of presents under the tree will fix that.
Over the River and Through the Woods, On the Holiday Budget You Go
There you have it! 10 tips to help you stay within your holiday budget this year.
If you’re budgeting for the first time and find yourself stuck, drop us a line in The Budget Brigade Facebook community. We’re always happy to help!
One final piece of advice before you head off to ho-ho-ho:
Have grace with yourself.
If you have never budgeted for the holidays before, and you end up going over budget, it’s not the end of the world. Adjust your budget to make room and return what you can. Just do everything in your power to stay away from dipping into your emergency fund or putting your overage on credit cards. As you adjust the rest of your budget and skimp on something else, use it as a training tool for next year.
Don’t beat yourself up. It is a learning process, and it happens to all of us, myself included.
Have a wonderful holiday season, my friends!