This article may contain affiliate links. Please read my disclosure statement for more information
The holidays can be wonderful, magical, memory-making opportunities. We experience all the sights and smells and sounds of joy, people are more friendly and generous than at any other time of year, and there’s just a general feeling of merriment everywhere we go! But the holidays have a dark side. Many of us struggle financially at this time of year more than ever because we want to buy all the best gifts and have the best parties and enjoy the greatest experiences. And all those things cost money. But there’s a very simple solution to your cash flow problem! Creating a budget early in the year will make your holidays even more joy-filled because money will be the last thing on your mind!
How much should I budget?
How much you budget for your holiday expenses is really entirely up to you. It will depend a lot on how many gifts you need to buy, whether or not you’re hosting a party, how much you can realistically afford, and maybe other factors. My general rule of thumb is to budget no more than about 2% of your annual income. So, if your total household income is $50,000 a year, you might plan to set aside about $1,000 for all of your holiday expenses.
When should I start budgeting?
Right now!! It doesn’t matter if Christmas (or Hanukkah or whatever else you might celebrate) is two weeks away or 12 months away, you need to start a budget now. Even if you don’t have enough time to save the full amount you want to save, every little bit you can set aside will help. And then next year you’ll be right on track to meeting your goals!
But honestly, the best time to start saving for next Christmas is December 26 (right after this Christmas is over). Just decide how much you want to spend, divide it by 12, and save that amount every month.
So for instance, if you want to save $1,000, you’ll need to set aside about $84 a month. I don’t recommend completely relying on expected bonuses or tax refunds or any other windfalls you might be getting. Instead, budget each month as though that money won’t be there. Then, if and when you do get that money – you’ll be able to either get ahead on your budgeting or add a little extra to your holiday fund!
What should be included in my holidays budget?
Every single purchase you make relating to the holiday you’re budgeting for should be included. This is not just a gift budget. If you’re budgeting for Christmas, here are some things you may want to consider adding:
- Gifts (even better if you can break down your budget by individuals and how much you want to spend on them, and don’t forget work or other group gift exchanges!)
- Gift wrap and tags and bows and all the other pretty things
- Decorations (yep, this even includes a Christmas tree – if that’s part of your tradition)
- Food for any parties you are hosting or attending
- Tableware and cookware for any parties you’re hosting
- Family photos & Christmas cards (don’t forget envelopes & stamps!)
- Travel expenses
- Charitable donations
A few holiday spending tips
- If you and your partner share a checking account or credit card, consider purchasing visa gift cards to purchase gifts for each other so that the surprise isn’t spoiled when one of you checks the bank statement. (This also helps you both stay on budget!)
- If you have a large family, consider inviting them to do a Secret Santa gift exchange instead of purchasing gifts for everyone. This means each person only purchases one gift, which can seriously cut the costs of gift-giving and also adds a little bit of fun to the mix since it’s a surprise who’s buying your gift!
- Be sure to include your kids in the holiday planning as well! It’s such a magical time and also a great opportunity to practice gratitude, compassion, and to foster a love of serving others!
Setting up a budget for the holidays that you contribute to throughout the year will save you tons of time, money, and headache when the holidays come. And that means you can spend your time actually enjoying the festivities rather than stressing out over whether or not you can afford them. Make this year the best holiday season you’ve ever had by creating your holiday budget now!
To make creating and sticking to a budget even easier, try out this amazing tool! YNAB helps you track your spending, budget your money, and reach your goals faster, all in one simple to use software. Give it a try today and get 2 free months using my link. You’ve got nothing to lose!