How to Budget for the Holidays

It’s like clockwork. Every year, the holidays arrive with a BANG.

Then, we blink, it’s January, and our wallets are empty.

Let’s change that!

This year, let’s make a pact to not go broke.

Say it with me: I will not let the holidays drain my bank account.

How can we ensure this happens? Easy: by creating a budget for the holidays (and following it).

Let’s get started!

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The Importance of Holiday Budgeting

Each year, Americans alone spend hundreds of billions of dollars during the holidays.

The bulk of this money, unfortunately, is spent using credit cards, making the holidays even more expensive.

One glamorous holiday is not worth going into debt for.

Or losing your savings. Or missing out on your dream vacation. (I could go on, but I think you get the point).

The truth of the matter is that the holiday season can be enjoyed, perhaps even more so, on a budget.

When creating a budget for the holidays, you are choosing to:

• Make a commitment to reach your financial goals
• Reduce holiday stress
• Take control of your finances
• Never be caught off-guard with major expenses

And that, my friend, is probably why you’re here in the first place!

Related: The Ultimate Guide to Frugal Living (everything you need to know to get started!)

How to Budget for the Holidays

Now that you know the benefits, let’s start building your budget roadmap for the holidays…

1. Get Organized

Set yourself up for success by getting organized.

Determine one place you wish to keep track of your holiday expenses.

Of course, you can do this in several ways, including the use of a 1. binder, 2. spreadsheet, 3. tablet document, or 4. phone notes page.

Personally, I recommend using a binder (this is the binder I use). I find it much easier to keep organized and feel in control of my money.

Whichever method you choose, make sure it is a method you will actually use.

For argument’s sake, I’ll discuss how to set up a binder. But, you could do the same thing for setting up a spreadsheet (with different tabs) or whatever else you chose.

Gather your supplies:

The first step in getting organized is to gather your supplies. Here are some of my favorites:

• 3-Ring Binder: This is an easy way to keep your information, as well as your physical paperwork (like receipts, printed coupons, etc.) all in one organized location. This binder is my favorite, it is incredibly durable (so you can use it for years to come) and uses D-rings (so your papers are never damaged).
• Divider Tabs: Divide each budget section using dividers, this makes navigation easy. I suggest finding a set of dividers (like these) that have pockets for quick storage and are pushed out enough so that you can use page protectors.
• Printable Calendar: Use simple printable pages, such as calendars, to fill your binder with functional pages. I personally love using these simple printable calendars. You could also use other fun printables, such as a Christmas Bucket List and habit trackers.
• Page Protectors: Page protectors are a great way to wrangle smaller, loose bits of paper, such as coupons, receipts, and gift cards.
• Envelopes: There are several great uses for envelopes, such as taking coupons on the go and storing cash.
• Free Monthly Budget Worksheet: Finally, using this free monthly budget worksheet is a great way to map out ALL of your expenses (including bills) for the month of December.

Set up your binder:

Here is a list of each section you might want to consider using. Don’t worry, more details on each section are below. For now, just create a space for each one (such as a labeled tab in your binder dividers).

1. Calendar: This is a great place to keep track of holiday sale events, coupon expiration dates, etc.
2. Holiday To-Do List: Be sure to include tasks related to your budget.
3. Holiday Budget Update Routine: A list of each recurring task you need to complete that relates to your budget.
4. Budget Overview: Your main budget plan, with a list of each spending category and how much you plan to spend per category.
5. Gift & Shopping List: A list of each item you will be purchasing this year, with notes on which store you plan on purchasing from.
6. Sales and Coupons: Here, you can keep track of sales and store printed coupons for safekeeping.
7. Receipts: Do yourself a favor and save all of your receipts! Just slip them into this section.
8. Notes: Always be sure to keep a section for notes, you never know if or when you’ll need a place to jot down something.

Related: 15 Brilliant Binder Organization Tips

Create a holiday budgeting to-do list:

Create a holiday budget to-do list by adding every task you can think of related to budgeting and saving money.

Tip for Saving Time: Copy down the steps in this blog post to use as a starting point.

Tip: Start this process early:

Begin working on your to-do list as early in the year as possible.

Ideally, you’ll want to begin in January, allowing you 12 full months to prepare (you’ll mainly be using this time to complete your savings challenge).

2. Determine Your Overall Holiday Budget

Next, it is time to take a look at what total amount you want to spend over the holidays.

Determine Your Monthly Budget

To help get a better feel for your money, first, take a look at your expected monthly budget for both November and December (and possibly October and January if you feel that’s necessary).

This includes your bills, expenses, income, etc.

An easy way to do this is by using this great free monthly budget printable. It is an easy-to-follow worksheet that walks you through the process of examining your income and expenses for the month.

Then, take a look at how much excess income you have planned for the holiday months. Keep this in mind as you complete the remainder of the holiday budget steps.

Related: Budgeting 101: How to Create and Stick to a Budget

Evaluate How Much You Spent Last Year

Next, go through your bank statements (as best you can) and calculate a quick, rough estimate of how much you spent during the holidays last year.

If you can, try to go one step further by categorizing your expenses (into groups such as groceries, gifts, activities, and travel), this will come in handy later.

If you are having trouble figuring out how much you spent, just total your expenses for the months of November and December, and compare them to the monthly budget you calculated in the previous step. The total excess value is probably a good estimate of how much you spent.

Reality Check: How Much SHOULD You Spend?

After looking at last year’s holiday expenses, you might need to take some time attempting to get your jaw off the floor due to shock.

You’re not alone.

If you’re not in this boat, gold star!

Either way, a vital step in creating a holiday budget is giving yourself a reality check by asking yourself these questions:

• How much can I realistically afford this holiday season?
• What amount of money is considered “too much” for my personal financial situation?
• How much am I comfortable spending this holiday season?
• How much money can I save up for the holidays between now and then?
• What amount of money can I spend before I have to reach for a credit card?

The 1% Rule of Thumb

Unfortunately, only you can decide the answers to the above questions. There is no one-size-fits-all solution. However, some do suggest that your maximum holiday budget should be 1% of your yearly income. If you are in need of guidance, use this number as a starting point.

If that doesn’t seem possible, perhaps just try to spend less than you did last year.

Determine Your Overall Holiday Budget Starting Point

Using all of this information (your monthly budget, last year’s holiday, and your reality check numbers), decide on a total holiday budget value as a starting point.

3. Create Your Budget for the Holidays

Now that you have a total holiday budget starting point, let’s begin breaking down that number and fine-tuning your holiday budget into something more simple and easy to use.

Determine Your Catagories

Choose a list of categories you know you will use during the holidays. Here are a few ideas:

• Gifts
• Stockings
• Cards
• Photos
• Decorations & Tree
• Extra Utility Expenses
• Gift Wrap and Supplies
• Food & Baking
• Travel
• Activities
• Charitable Donations
• Other

Determine a Budget for Each Category

Now, determine a budget amount for each category.

Start with your biggest expenses first, such as travel (airplane tickets, hotels, rental cars, etc.), then move on from there.

Be sure to use last year’s expenses as a guide.

Get Detailed with Your Gift Budget

Once you reach your gift budget, create a list of everyone on your gift-giving list. Also, be sure to add any gift exchange or white elephant gifts you have planned.

Once you are done, go back and ask yourself Do I really need to purchase a gift for this person? If the answer is no, remove them.

Then, create an additional budget for each person. If you need help with this, add a few gift ideas to get a better idea.

Here are a few suggested guidelines you might want to consider (this is NOT a hard rule, just an idea to get you started):

• Spouse: $100-$300
• Children: Between $50-$200 (depending on age)
• Parents: $40 – $60 each
• Grandparents: $10 – $30
• Family You See Often: $20-$60
• Family You Don’t See Often: $5-$20
• Friends: $10-$15
• Pets: $5
• Neighbors and coworkers: $2

Related: 99 Unforgettable Gift Ideas Under $25

Finalize Your Budget for the Holidays

Once you have each category assigned a budget, calculate your grand total and compare it to your total holiday budget starting point.

If these numbers are not the same, go back and re-evaluate your budget category values. Tweak them until your total is either equal to your starting point, or until you are happy with the total holiday budget value (even if you had to change it from your starting point).

This final number will be called your Total Holiday Budget.

Before you move on: Ask yourself one more time: Is this budget realistic? Am I happy with it? If not, continue changing it until you are!

4. Set Up Your Holiday Savings Challenge

Next, let’s set up your holiday savings challenge.

Start by counting up how many weeks there are left from today until the holidays begin for you (perhaps around November 20th). Let’s call this number: Weeks Until The Holidays.

Then, take your Total Holiday Budget and divide it by the Weeks Until the Holidays number.

Easy! You’ve just calculated your Holiday Savings Challenge Amount.

Be sure to set aside this much money every week. You can do this by either transferring money into a separate bank account, taking out cash and adding it to an envelope, or setting it aside in your budget spreadsheet.

Tip: Be sure to add “Set Aside $__ For the Holidays” to your budgeting routine (or add it as a recurring reminder, to do, calendar event, or whatever else works best for you).

Example Holiday Savings Challenge Calculations

Today’s Date: August 12th

Date to Begin Spending Money: November 25th

Weeks Until the Holidays: 15

Total Holiday Budget: $900

Weekly Savings Challenge: $900/15 = $60

The Secret to Easy Holiday Savings Challenges

Ideally, you want to start your holiday budget and savings challenge in January, so that you have the most time possible to save.

For reference, in the previous example, if the savings challenge were to begin in January, the weekly amount would only be $20 instead of $60.

But, if you are reading this and it is not January, never fear!

Simply begin now.

However, I highly encourage you to schedule on your calendar to begin this process again next January, so you don’t forget!

5. Strategically Prepare for Holiday Shopping

Next, be sure to create a strategic shopping roadmap to ensure your money stretches as far as possible.

This roadmap contains several parts. Let’s begin by finalizing your shopping list.

Create a Realistic and Strategic Shopping List

As the holidays get closer, sit down and brainstorm your entire shopping list.

Include everything from major items such as large gifts to smaller details like cheap baking supplies.

You can easily organize these lists by category or store.

Tip: Before you move on, re-visit your shopping list and try to remove anything that is unnecessary (do you really need that extra strand of lights for your porch?).

Research Sales, Print Coupons, and Compare Prices

Next, take a look at your favorite store websites and check out their holiday sales. Jot down any important dates and notes on your calendar.

Then, look up coupons for each major item. Print them out, add them to your binder, and add notes to your shopping list.

Next, use an online price comparison tool. This will help you decide where to purchase each item. Be sure to take into account what coupons and holiday sales you also found to make sure you get the best deal possible.

Finally, next to each item, be sure to write down which store you plan on purchasing from, as well as add the shopping date to your calendar.

Related: How to Create a Cyber Monday Attack Plan

6. Set Up a System for Success

The final (but crucial!) step in the holiday budgeting process is to set up a system to stay on track with your budget.

There are several options on how to do this (listed below). The key is to find something you will actually use.

Set Up a Budgeting Routine

Set up recurring tasks to help you track your expenses, save money, and stay under budget.

Here are a few routine task ideas that you might want to consider:

• Fill out spending tracker (daily)
• File receipts (daily)
• Check Amazon Deals and Couponing page for new top deals (daily or weekly)
• Research new sales and coupons (weekly)
• Check rebate apps like Rakuten for more savings (weekly)
• Fill in budget progress (weekly)
• Check-in with shopping list (weekly)
• Transfer Savings Challenge money into Holiday Bank Account (weekly)
• Evaluate the previous month’s budget on free printable (monthly)
• Set up next month’s budget using free printable (monthly)
• Check into financial goals (monthly)
• Add charitable contribution paperwork and receipts into the tax file (monthly)

Tip: I go into more detail about budgeting routines for everyday life in this Budgeting 101 blog post.

Use a Budget Tracker

A budget tracker is a simple table that tracks your spending and how much you have left in your budget.

The table should have the following columns:

• Date: The date of the purchase
• Amount: The amount of money that was spent on the purchase
• Description: Name of the expense, item, group of items, or store the purchase was made
• Category: (optional) The budget category the item falls into
• Balance: How much is left in the overall budget or budget category for the remainder of the month
• Total: A running total of the money spent for the month or category

A budget tracker can easily be used in a binder (here is a great printable budget tracker), spreadsheet, phone app, or scrap piece of paper left in your wallet.

The Cash Envelope System

Some people prefer to take out their entire holiday budget in cash and stuff them into different envelopes, one for each category, using a cash-envelope wallet (like this one).

Then, they will only use this cash for holiday purchases (no debit or credit cards).

This forces them to really think about their expenses carefully and stop spending when they run out of money.

Because of this, it is the perfect system for anyone who has trouble tracking their expenses or needs a bit more discipline.

Warning: If you do choose this method, be careful! Keep your envelopes in a safe place. Don’t be like me and forget them at the check-out counter!

BONUS: Holiday Money-Saving Tips

1. Start early
2. Shop online and use online price comparison tools
3. Purchase gifts in bulk, then separate them (like candy)
4. Use rebate apps (like Rakuten and iBotta)
5. Instead of filling stockings with gifts, fill them with USEFUL items you would already by purchasing (like new toothbrushes, snacks, chapstick, hair care, lotion, new office supplies, etc.)
6. Subscribe to the email lists of your favorite stores
7. Check out Craigslist and other similar sites for gently used or brand new unwanted items for dirt cheap
8. Start a side-hustle to bring in some extra cash (here are 21 easy ideas)
9. Shop at the cheapest store first (the Dollar store actually has some great things!)
10. Try to convince your family to do a thrift shopping white elephant instead
11. Make homemade gifts
12. Use your old gift cards that are about to expire to purchase gifts or other holiday necessities
13. Opt for cheaper gift ideas that mean more (here are 99 cheap but meaningful gift ideas!)
14. Purchase gift sets, then remove all the items and individually wrap each one
15. Consider activities instead of physical gifts (Rakuten usually has some awesome deals)
16. Stick to your shopping list
17. Swap your Christmas cards for Christmas emails instead

Related: A Complete List of Game-Changing Holiday Money-Saving Tips

My Favorite Money-Saving Tip: Shop Deals Throughout the Year

I know, I used to be skeptical too.

But, hear me out.

A few years back, I stumbled upon Rakuten and scored over 50% off plus cashback on a new tablet.

I KNOW, RIGHT?! It wasn’t even remotely near Black Friday (or any other holiday, for that matter).

Since then, I’ve saved hundreds of dollars every year on gifts by shopping throughout the year. I simply keep an ongoing list of gift ideas and check for sales on Rakuten every other week or so.

So, what is it? Rakuten is a rebate website that pays you for shopping normally using their browser extension (or app). They get a commission from various brands and split that money with you. Win-win!

The crazy thing is that Rakuten posts huge deals (often better than Black Friday) all year round. So, if you pay attention, you can collect gifts and activity tickets throughout the year for a fraction of the cost.

I also noticed that Amazon has a similar year-round sale system through their Amazon Deals page and coupons page.

So, if you want to join the serious-cash-savings club, keep an eye on these sites throughout the year. You might be shocked at what you find (and you’ll gather some great gift ideas along the way).

Sign up for Rakuten for FREE and get a Welcome Bonus >> HERE

Further Reading

• Foolproof Holiday Money-Saving Tips
• 99 Unforgettable Gift Ideas Under $25
• The Ultimate Monthly Budget Review Checklist
• Budgeting 101: How to Create and Stick to a Budget
• A Complete Guide to Frugal Living
• 21 Legit Ways to Make Extra Money
• 57 Insane Money Saving Tips

You’ve made it to the end! If you’re reading this, I’m impressed. That was a lot of information and words I just threw at you. I truly hope you found some of it useful. I wish you the best of luck in your budgeting journey! Oh, and don’t forget to snag your free budget printable to easily set up your monthly budget.