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Cost Savers

How to Plan for a Holiday Budget

Piggybank in Santa's hat

Many people end up spending much more than they intended during the holiday season. In 2015, Americans planned to spend an average of $830 on Christmas gifts, a sharp rise from the  $720 average the previous year. Planning a holiday budget and sticking to it is a good way to keep yourself – and your finances – in check.  Follow these steps to create a plan so that you can have happy holidays without financial worry.

Step 1: Start saving and shopping as early in the year as possible.  

Set up a savings account that is earmarked for holiday spending, and stick to your savings. Look at last year’s bank statements to estimate how much you’ll likely spend, and divide that amount into weekly or monthly deposits. Buy Christmas gifts throughout the year to take advantage of seasonal sales and other promotions.

Step 2: Write out a budget.

It’s not enough to have a rough number in your head.  You need to set a firm budget and then itemize and total your expected expenditures.  To do this, you can make a simple list, use a spreadsheet template, or create a spreadsheet yourself.  You can also use Christmas apps to keep track of gift lists and costs, as well as to help you find the best deals and sales. 

Step 3: Make your Christmas budget all-inclusive.

Include all gifts that you plan to purchase for family and friends, as well as any presents or end-of-year bonuses that you plan to present to teachers, babysitters, or house cleaning help.  While gifts will likely take up the biggest chunk of your budget, be sure to also plan for these expenses:

  • Holiday meals at home (extra groceries, beverages, decorations, etc.)
  • Holiday meals out (special brunches, lunches, and dinners with friends and co-workers)
  • Decorations for your home
  • Wrapping paper and supplies
  • Travel costs (gas, airline tickets, etc.)
  • Package mailing costs
  • Party invitations, holiday cards, and stamps
  • Entertainment (holiday movies, plays, community events)
  • Increased utility bills if you have houseguests
  • Pet care/boarding
  • Clothing purchases

Step 4: Assign a firm monetary limit to each gift and expense item on your budget.

 The total of all your line item expenses should not exceed the holiday budget that you set. If it does, go back and reduce the numbers assigned to some of the line items until the total is within your budget.

Step 5: Monitor your spending as you go.

Use your budget list, spreadsheet, or app as you shop.  Keep track of each actual line item cost, including tax, and whether it is over or under the original cost that you assigned to each item. If your actual expenses are less on any particular items, you can transfer those amounts to be used on other items, if needed.

Step 6: To help you stick to your holiday budget, comparison shop online.  

You may even save on shipping costs if you order multiple gifts from one site.  In addition to saving money for the holidays, you’ll also avoid crowded shopping malls and long lines.

Step 7: Save your holiday budget documentation for reference next year.

It might also be helpful to save gift receipts, credit and bank card statements, and any helpful notes on your list or spreadsheet that might aid you in planning for coming holiday seasons. 

Another helpful tip for holiday budgeting is to build in an incentive for yourself.  To encourage you to closely follow the holiday budget, make one line item a reward for sticking to or bringing the budget in under your projections.  The bonus could be a special meal out, an item of clothing, a new holiday decoration, or additional funds to spend on the gift recipient of your choice.  Taking the time to plan for your holiday spending and following through on your budget is one of the best ways to ensure a happy start to the New Year.

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