Christmas on a Budget: How to Make Sure You Don’t Fall Into Debt This Holiday Season

Christmas on a Budget: How to Make Sure You Don’t Fall Into Debt This Holiday Season

November 30, 2021
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Happy Holidays! Yes, it's that time of year again!

For many, Christmas is your favorite time of year, but it can also be rough on your budget. With lots of gifts to buy, parties to attend, and seasonal events, the expenses seem to pile up in a hurry.

According to the National Retail Federation, the average American plans to spend approximately $1,000 on Christmas this year, including gifts, food, and decorations. If you’re not prepared, that’s a huge amount of money to come up with all at once.

Keeping Christmas spending under control is a big part of being a financially responsible individual. Thankfully, you don’t have to be a Scrooge in order to escape the holiday season with your finances intact.

In order to control your Christmas spending and to prevent a nasty surprise when your credit card bills arrive in January, you should decide exactly how much you’re going to allocate to Christmas-related expenses. You can do that by creating a Christmas budget.

How to Create Your Christmas Budget

Budgets are often used for managing monthly income and expenses, but have you ever considered creating a budget specifically for Christmas? Your Christmas budget doesn’t need to be complicated. We’ll walk you through the simple steps you can take, and we’ll even show you a sample budget.

Step 1: Determine How Much You’re Going To Spend on Christmas

First, you should decide exactly how much money you are going to spend on Christmas-related expenses as a whole. Take a look at your current financial situation and see what you can realistically afford to spend without going into debt or without going overboard. For the sake of our sample budget, we’ll plan to spend $900 so we can stay below the average and still have a nice holiday season.

Step 2: Create a List of Your Christmas Expenses

Next, think about all of the ways that you’ll spend money at Christmas. Gifts are the most obvious expenses, but most people also spend money in some of the following ways:

  • Food and alcohol for family gatherings or parties 
  • Indoor and outdoor decorations
  • Admission to events
  • Christmas cards and stamps
  • Family photos
  • Charitable giving
  • Wrapping paper
  • Costs associated with travel (gas, tolls, airline tickets, etc.)

In terms of gifts, your Christmas budget should have a line item for each person that will be receiving a gift from you. Family and close friends will be the obvious inclusions, but don’t forget about others like neighbors, co-workers, postal delivery workers, that friendly barista at the coffee shop, or whoever else you might be shopping for this year.

Step 3: Decide How Much You Will Spend for Each Line Item

After you’ve determined how much you’re going to spend and you’ve listed all of your Christmas-related expenses, the next step is to break it down and decide how much you’re going to budget for each line item.

You’ll probably have to play around with the numbers by increasing or decreasing line items to get just the right total. Of course, your budget will be impacted by the size of your family and the number of people that you buy gifts for.

Here is a look at our sample budget:

Christmas Budget
ItemAmount
Food$75
Decorations$75
Photos$0 (will take them ourselves)
Christmas Cards and Stamps$125
Charitable Giving$25
Wrapping Paper$25
Gifts for Spouse$125
Gifts for Child #1$125
Gifts for Child #2$125
Gift for Mom$25
Gift for Dad$25
Gift for Mother-in-Law$25
Gift for Father-in-Law$25
Gift for Friend #1$25
Gift for Friend #2$25
Gift for Neighbor$25
Gift for Coworker$25
Total$900

Step 4: Track Your Expenses

Creating your budget is a great start, but in order for it to be effective, you must actually stick to the budget. You’ll need to record your expenses to see how much you’ve actually spent.

Tracking expenses is really simple. All you need to do is create a very basic spreadsheet with each line item in your budget, and then update the spreadsheet whenever you make a Christmas-related purchase.

If you use a budgeting app, you could also set up a specific Christmas budget and use the app for that as well. A good old-fashioned pen and paper budget still works too. It doesn’t matter how you track your expenses, so just choose the approach that is most convenient for you.

5. Consider Family Gifts

Another way to easily reduce the number of gifts that you buy and the overall amount that you spend is to go with a family gift instead of gifts for each person in the family. This could potentially save you a lot of money. Plus, it’s fun to come up with a gift that everyone in the family will like.

6. Evaluate Your Expenses

When you’re creating your Christmas budget, evaluate the different line items and think about whether they’re really necessary and if they bring enough value or joy to justify the expense. Most of us have traditions that we tend to follow at this time of year. There is nothing wrong with traditions, but do you really enjoy them or do you do them simply because that’s what you’ve always done?

When you evaluate the ways you spend money at Christmas, you may decide that some things simply aren’t worth the amount of money that you’re spending on them. If that’s the case, reduce the amount in your budget (if possible) or skip that expense altogether.

Christmas should be a fun time of year rather than a stressful season filled with financial worries. With the right approach, you can enjoy all of the great parts of Christmas without overspending or racking up debt. Put these tips into practice and you’ll be giving yourself the gift of a more enjoyable Christmas.

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