Christmas gift by the Tree

How To Rock Your Budget For Christmas

Christmas is the most wonderful time of the year, but it can also be the most expensive time of the year. Many of us spend money on gifts, decorations, hosting events, traveling, and so much more. According to YouGov, the average Christmas spending amounted to 883GBP in 2020, and presents made up the bulk of that amount. 3 in 10 Britons say they overspend during the Christmas season. According to National Retail Federation, Americans planned to spend $998 on average on Christmas expenses. Christmas gets expensive and many go into debt. A solution to enjoying the most wonderful time of the year debt-free without worrying about money is to budget for Christmas.

Determine Your Budget For Christmas Before You Start Shopping

The best time to create your Christmas budget is before you start shopping. The earlier you get this done, the better. Make a realistic budget for Christmas by doing these five key things:

  1. Identify all key budget categories (gifts, decoration, travel, giving, food etc.) based on your plans
  2. Determine a total budget for each budget line item and category
  3. Make a list of every single person on your list and assign a dollar to each person
  4. Check your bank or credit card statement for last holiday season to see if you have missed any expenses
  5. Determine if all your Christmas expenses will be funded with cash or if you have other options (see below)

Save For Christmas Throughout The Year

Unless you have access to a decent cash stash already, it is easier to save for Christmas over the course of the year using sinking funds. For example, if you determine you’ll need a total budget of $500, you’ll need to save $41.67 (okay, round up to $42) each month for 12 months. To save the same amount in the second half of the year, you’ll need to save $83.33 per month for six months. When you save money for Christmas throughout the year, you are using sinking funds to fund annual expenses. Sinking funds are amounts set aside. Examples of other items you may create a sinking fund for include: semi-annual car insurance expenses, car repairs, travel expenses, and so on.

Buy Airfare Early

As someone that lives thousands of miles away from most of their family, airfare is almost always a part of my Christmas budget and it is an expensive line item. Depending on where I go for Christmas, travel expenses can be the largest expense items. Many immigrants and remote workers often find themselves in this position. From my personal experience, last-minute tickets cost a pretty penny. Consider shopping for international airfare 6-9 months in advance of your proposed travel dates around the holiday.

Shop With A List

You’ve got the budget for Christmas, you’ve saved and now it’s time to kick off your shopping. Exciting! I’ll be the first to confess that I have found myself shopping for myself when my intent was to shop for others. This happens whether I’m shopping online or in-store. Why not shop with a list to help you stay away from the temptation of shopping for yourself? You really don’t need one of everything you’re buying for others; I promise I’m talking to myself here as well!

Shop With Cash

Shopping with cash may be key to staying within your budget for Christmas. The envelope method of budgeting is one where you set aside cash for each budget line in an envelope, and once the cash is done, you’re done for the month! Using the cash envelope method while you shop for Christmas gifts might be the discipline you just need to avoid getting into credit card debt.

Redeem Rewards

A great way to fund your Christmas budget is to redeem points for cash, gifts, gift cards, or charity depending on what you need. Here are five examples of ways you can redeem the rewards you’ve worked had to earn during the year over the holidays

  1. Redeem airline mileage to fund flights home to see your family
  2. Use credit card points for specific gift cards to give your family and friends (for things, places, or experiences that they love)
  3. Redeem airline or credit card points to donate airline miles to worthy charity causes that are aligned with your values and your personal philanthropy plan
  4. Redeem points to fund holiday décor shopping at your favorite retailers

Shop For Christmas All Year Round

While it may require planning, Christmas shopping all year round will not only save you from the rush between Thanksgiving and Christmas, but it will also save you money. By shopping for Christmas throughout the year, you are able to take advantage of the best times of the year to buy different items. My sister is great at this but I, on the other hand, I’m the poster child for ‘team last-minute!’ I can confidently tell you that waiting until the last minute is expensive. What can you do to start shopping for Christmas early this year?

How To Budget For Christmas When Things Are Tight

Growing up, Christmas was the one time of the year that we got new clothes for the holidays. We got new clothes, new socks, new shoes, and even new underwear. Exciting times! Other times, my mom mostly shopped imported second-hand clothes and we also wore hand-me-downs (I’m the third and youngest daughter). I know my mom worked hard and saved up for Christmas throughout the year so we could at least have new clothes during the holidays and my siblings and I appreciated the sacrifice. I write this to share that it can be tight for many people/families around the holidays. In some cases, you may not even have a budget at all.

If things are tight, here are five ideas on how to rock your budget for Christmas this year:

  1. Plan a no gifts Christmas, because after all, it isn’t about how many shiny gifts we have give or receive
  2. Plan a limited spend Christmas (think $20 – $25 maximum per gift)
  3. Give gifts that cost no money (time, service, re-gifting, and so on)
  4. Plan for an experience for/with your loved ones at a later time
  5. Look around at what you have. And identify items you no longer use that can be sold to free up some cash.

You don’t need to spend an arm and a leg to have an amazing debt-free Christmas this year or any year. Regardless of your budget, it is important to spend within your means at all times, but especially at the tail end of the year. No one wants to start off the New Year with a big credit card bill due to holiday spending.  With these tips, you will absolutely rock your budget for Christmas this year, regardless of your financial situation. Which of these tips will be game-changing for you this year? What else would you suggest? Please share in the comments.


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