Christmas is coming within seven weeks. Some people are already stressed out financially.If you feel the same, you are not alone.
According to a recent study conducted by OnePoll on behalf of Walgreens, 79% of men find the holiday season stressful, whereas 66% of women feel stressed1.
Imagine waking up one day in January with an empty pocket and mounting credit card bills; that’s not fun!
Luckily, you CAN avoid this unwanted financial stress by creating a Christmas budget and sticking to it.
It doesn’t have to be complicated. I will show you how to do it step by step in this post.
What Is A Christmas Budget?
A Christmas budget is like the household budget you have made for your money management.
It is a financial plan to help you manage your Christmas spending, so you can have enough money to cover all your holiday shopping.
You could figure out what you will buy and how much exactly you plan to spend on each category with the budget.
Why Create A Christmas Budget – Financial Planning For Christmas
There are three obvious benefits of having a realistic Christmas budget in hand.
First, it’s hard to save money for your holiday spending if you live paycheck to paycheck. Having a budget could help you save enough money before the big day arrives.
Second, setting up a holiday budget ahead could help you be more aware of your holiday spending and reduce unnecessary costs.
And finally, a Christmas budget could keep you sane with all the holiday obligations during the sales season.
A realistic budget is a MUST if you don’t want a lasting Christmas spending hangover.
How to Create a realistic Christmas Budget That Works For You
Step 1. Check Your Monthly Income
Before creating a Christmas budget, you will need to know how much money you earn.
Note: Your monthly income includes all the money (e.g., yourpaychecks and bonuses) you take home.
Step 2. List Your Monthly Expenses
Your monthly expenses will directly affect how much you can spend this Christmas.
If you overspend every month, you wouldn’t have extra cash left for the holiday spending. So it’s important to figure out the day-to-day expenses before setting up a budget for Christmas.
Further reading: Which Payment Type Can Help You Save More And Spend Less?
If you have already made a budget for your everyday expenses, you should already have the numbers ready.
However, if you are new to budgeting, here is what you can do.
List all your monthly bills and living expenses.
- emergency funds
- phone bills
- credit card debts
An easy way to do this is to use an online budgeting app.
Step 3. Check How Much Money Is Left For Now
After figuring out your income and expenses, then do the following step:
💰💰💰 Total income – Total expenses 💰💰 = Leftover 💰
The leftover is the amount you have for now.
Then you can think of the total amount you want to spend this Christmas.
Step 4. Write Down Everything You Are Going To Spend For This Christmas And Assign each Item an amount
Write down everything you are going to spend for this Christmas. And this is not just about gift expenses, although they are a big part.
Here I break down the most common Christmas-related expenses for your reference. Feel free to add more or delete some.
- Christmas gifts 🎁 🎁
You can write a list of the names you want to give gifts for.
A quick way to do this is by checking your contacts on your phone, so you don’t miss out on somebody important (e.g., spouse, kids, siblings, extended family, friends, and co-workers).
Related articles about budget-friendly gift ideas:
- Holiday decorations
This includes lighting, Christmas trees, candles, wreaths, ornaments, and other related home decors.
- Holiday entertainment
Are there any parties you plan to attend (such as work parties, friends gatherings, and Christmas plays)? Or, are you planning to travel with your family thisChristmas?
All the expenses of holiday-related activities will fall into this category.
- Holiday food
This includes all food costs such as the typical Christmas Eve dinner, Christmas breakfast, lunch, dinner, eating out, work potlucks, and all the delicious meals you will have during the holiday season.
- New Party Clothing/festive outfits
Want something new to wear for this holiday? Add the items here.
When you finish the list, write down the total amount first and then figure out how much you plan to spend on each category and person instead of the other way around.
Don’t forget to allocate an amount for unexpected expenses, such as secret Santa parties or unforeseen house parties (extra Christmas gifts for the hosts). You don’t want to put a dent in your December budget when this happens.
👉 Pro Tip: The total amount should be based on your income, expenses, what is left, and how much you want to save realistically.
How Much Money Should I Budget for Christmas?
Unfortunately, there is no magic number for how much you should spend on your holiday spending.
However, on average, Americans are expected to spend around $998 on Christmas shopping this year2.
In general, you don’t want to spend more than one percent of your gross annual income on Christmas shopping.
Say you earn $60,000; you should spend less than $600.
It’s up to you to beat the average or spend much less. But remember, it’s NOT a competition.
If you are not sure about the entire holiday budget for this year, you could always refer to your last Christmas spending.
That should give you a good idea.
Eventually, you want to come up with a number that you can comfortably afford.
Step 5. Save Money By Setting Up A Christmas Sinking Fund
Once you figure out your Christmas budget andholiday shopping list, you will know how much you want to save each month.
Then it’s time to set up a Christmas sinking fund. So you can have enough money set aside before the end of the year hits.
Ideally, you want to start saving right after last Christmas so you can spread out the amount over the year.
But in reality, it’s not always the case.
You can figure out how much you want to save, then divide it by the number of months between today and December.
For example, if your total budget amount for this Christmas is $900 (with five months left until December), then you need to save $180 every month ($900 ÷ $5 = $180) to cover your Christmas spending.
You will feel a sense of achievement when you see your Christmas savings account grow each month.
💡 Note: Don’t touch your Christmas savings account unless it’s for holiday shopping. This is not an account for your accidental car breakdown, an unexpected medical bill, or additional utility bills.
– How To Save More Money For Christmas (#5 Is A Must-Try)
Step 6. Find Ways To Cut Back Your Expenses
If your Christmas spending options match your entire budget, congrats! Task completed.
However, if the total number is way more than you could afford, you need to be realistic.
👉 Pro Tip: You are the boss of every dollar you earn, and every dollar has a job to accomplish to make your life more productive and convenient.
Make cuts or simple tweaks on everything that is not your highest priority until you feel more comfortable.
Maybe you have spent too much on groceries (we all do), and you can cut down your food expenses with a lovely meal plan.
Related article: How I Simply Stop Buying Things I Don’t Need
Bottom line: Never take credit card debt. But if you have to, find the 0% interest one and pay it back each month.
Step 7. Track Your Spending During The Holiday Season
There is no point in making a budget without tracking it.
Your spending is like the patient in the intensive care unit, who needs constant checking and assessing.
The main point of doing this is to avoid overspending.
That said, you CAN make tweaks to the estimated Christmas budget if you have spent more on one category than initially planned. Just cut back on other parts.
You are also welcome to find ways to spend less.
Maybe you find a better deal for the secret Santa gift ($25) with a value of $65. Then you can have the extra $40 to cover other expenses.
Don’t forget to record the transactions on the go so that you can spend within your reach.
How Can You Cut Down on the Cost of Gifts?
Do you know 86% of millennials (23 to 38) overspent on holiday gifts last year3?
According to National Retail Federation, the typical American plans to spend $648 ongifts for family, friends, and co-workers4.
This is the section you can make some cuts if you are shopping on a tight budget during the gift-giving season.
Here are some tips to help you save lots of money on gifts.
1. Trim your Christmas gift-giving list.
When I separate the name list into three sections, my priority seems obvious.
- People I care and love (the highest priority)
- People I like
- The ones I feel obligated to buy for
You can also try this method.
Although it’s nice to give a gift to everyone on your list, it’s not necessary to do that. And you need to be realistic with your finances.
2. Cut back on each gift.
Sometimes it’s hard to trim out the number of people. Maybe you can cut back on the amount of money you plan to spend on each person.
For example, you can reduce $10 on each gift (spouse: $160 to $150, kid: $65 to $55).
3. Use coupons and cashback apps while shopping.
4. Make small but meaningful gifts and buy gift-making supplies at dollar stores.
5. Shop Christmas gifts all year around to find the best deals.
6. Say no to unexpected gift exchanges activities.
7. Give group presents.
8. Redeem credit card rewards for gift cards.
Stop Feeling Bad When Other People Are Spending Like Crazy
The holiday season is not a competition of showing off. And it’s certainly not a period to make you feel bad.
If you find yourself easily influenced or persuaded by others around you, ignore what they are doing for a while and maybe stay away from your social media accounts as well.
Instead, appreciate what you already have and work towards what you want.
When others are spending, you are saving and making.
When others are broke and financially stressed next year, you are relaxed.
What To Do If You Don’t Have Enough Money Saved?
If you are not financially prepared for this Christmas, here are some options.
You can try a no-spending Christmas or find ways to earn moneyfast for your Christmas spending.
Here are some ideas to get fast cash.
- Sell your homemade gifts: Not everyone likes to make gifts themselves, but they may like the idea of cheaper homemade presents.
- Take surveys using online sites like Survey Junkie to make quick cash and earn gift cards.
- Ask for extra tasks at work.
- Try TaskRabbit by offering services in your neighborhood like cleaning, moving, or painting.
- Find a temporary job to make hundreds of dollars within a month. Many retail stores are short of workers during the sales seasons. You might get a higher wage AND employee discounts when purchasing at the store.
Want to make far more money than your full-time job? Try blogging.
Note: Blogging is not a get-rich-quick scheme, but the money-making opportunities are unlimited.
You can check out how I started this blog here if you are interested.
Final Thoughts On How To Create A Christmas Budget
Christmas is the time for YOU to have fun and relax. The last thing you want is more financial stress and frustration after working so hard for the whole year.
Don’t start your new year with a terrible holiday spending hangover and regrets.
You CAN do your Christmas shopping with ease by having a realistic budget.
I sincerely hope this post can help you create a Christmas budget, and you can have a debt-free holiday.
💸 Happy Budgeting! 💸
What are your best tips for creating a Christmas budget? Let me know in the comments.
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