How to Make a Holiday Budget | A Step-by-Step Guide
When I was in the middle of the 2016 holiday shopping circus, I saw something interesting come through my email inbox.
Experian had published a study about holiday spending that had the usual data, including how we now spend around $1,000 during the holiday season on gifts, parties, etc. These aren’t the stats that jumped out at me though.
As I read through the data, I was amazed to find out two things about our holiday budgeting habits:
- 56% of us say we spend too much during the holiday season
- 43% of us say the extra expenses make the holidays hard to enjoy
- 62% of us don’t make holiday budgets.
Those three facts suck all the financial cheer out of the holidays for me. It’s disheartening to know that many of us can’t fully enjoy a time of the year that’s meant to be thoroughly enjoyed.
The solution to this gloom is straightforward: budget. I advocate for budgeting year round but even more so at the holidays. We spend more and our tendency to shun budgets increases during the holiday season, Experian noted.
Planning Your Holiday Budget:
Know How Much You Can Spend
This will be the most difficult part of building your budget because it requires you to be honest about how much money you’ve got and how much you can spend.
This important step will be tough if you don’t already have a monthly budget and/or you use multiple checking and credit accounts to make your monthly purchases.
If that’s you, then you’ll have to calculate your monthly spending from the past few months and subtract it from your take-home pay from the same time period.
Those with a budget have it much easier; you should already know how much extra you have at the end of the month.
Once you know your monthly surplus, give yourself a realistic spending goal. Do you want to use one month or two months of surplus on your holiday budget? It’s up to you. Ideally, you’ll choose an overall budget limit that won’t put you in debt.
At this point, you’ll want to build the nuts and bolts of your budget.
Building Your Holiday Budget:
Who, What, Where and How Much
Now that you’ve got your budget limit set, it’s time to create the details of how you’re going to spend that budgeted money.
Here’s how you do it. First, make a list of two things: people you’re buying presents for and events/parties you have to bring gifts/food to. Don’t forget to include random relatives you get gifts for as well as school functions and work parties that might require white elephant gifts or food.
Once you have all of that written out, create a spreadsheet on your computer or table. Call the first column “Name/Event”. Then, enter all the names and events in that column.
Make a second column called “Gift“. Write down what you want to buy the person or buy/cook for the event. Don’t feel bad about planning ahead and not being spontaneous; this may not be the fun way to buy gifts but it’s the smart way.
Site/Store and Price
Create two more columns: Site/Store and Price. This might be the most time-consuming part of this process because you’ll need to do your research to find out where you can get the best price.
This is the step in your budgeting where you can apply two budget methods to each present: per-present or overall.
Per-Present Budget or Overall Budget
If you’re like me, you’ll do a set-price budget where you cap per-present spending. For example, you could say that you’ll spend $25 on non-immediate family members, $50 on spouses and $100 on kids. Add another column titled “Budget” if you go this route.
These per-person limits depend on your overall budget limit and how many people you want to buy presents for. Again, it may not seem fun to set a limit for each person, but doing so will help you avoid the trap of overspending and going into holiday debt.
Also, don’t feel bad if you can’t spend as much as you’d like on your relatives and friends. There’s nothing wrong with being financially responsible.
If this particular type of budgeting isn’t your style, then feel free to choose the presents you’d like to give and then see if your end total matches what you’d like to spend.
My suggestion is to add another $100 to your total to cover yourself for random events and people you forgot to include in your Name/Event column.
Add up all the presents and food you anticipate buying and compare it to what you want to spend.
Perfecting Your Holiday Budget:
Tips for Cutting Costs
At this point, you should have a clear picture of what your holiday budget is. The bottom line might scare the cheer right out of you or it might put a smile on your face.
Whichever the case, there are specific things you can do to refine your numbers.
Amazon Prime: Solid Way to Save
First, consider using Amazon Prime if you don’t already have it. The site’s free shipping, solid return policy and friendly customer service are the perfect mix of customer-forward traits during the holidays.
Their prices might be slightly higher than what you’ll find at big-box or department stores. The convenience of the site, along with affordable gift-wrapping (usually less than $5), make it the perfect way to send gifts to friends and relatives.
Your inclination will be to buy the $99 yearly Prime membership, but save yourself the money and do a one-month free trial that, in many cases, can be extended for another month for free when you try to cancel the initial free trial.
Buy Gifts You Can Bundle
Last Christmas I was looking for good ways to cut costs on Christmas gifts. At the same time, the battery started dying on my Tile, a Bluetooth tracker I attach to my keys so I don’t lose them.
I opened my Tile app and looked at how much a replacement would cost and I discovered that I could buy four-packs at a great price.
I did some quick math and realized I could buy the bundled Tiles as gifts for my dad, brother and father-in-law and come in under budget or the price limits we set on their presents. I kept the fourth Tile for myself using some of the money my wife and I budget for buying fun stuff for ourselves.
Don’t Like Spreadsheets? Use an App
Spreadsheets aren’t for everyone. Thankfully, there are multiple apps for iOS and Android designed for Christmas shopping.
I did a test run with the Android/iOS app Christmas Gift List and was quite happy with how it functioned. It’s the app version of the spreadsheet method. There are three tabs: Gift List, Shop and Stats.
Use Gift List to add the person, the budget for that person, their gift and a note/link for the gift. The Shop tab shows you what needs to be bought and the Stats section keeps a running total of what you’ve budgeted, what you’ve spent and how many gifts you still need to buy.
The drawback is that you can’t cloud your list across multiple devices but that’s not necessary if you’re single. If you have a partner, appoint one person to oversee the budget and then stay in communication about what you’ve purchased.