5 steps to create (& stick to) your holiday budget this year

BY Jesi Bolandrina
Holiday budget

04 Nov, 2020

5 steps to create (& stick to) your holiday budget this year

BY Jesi Bolandrina

The word ‘budgeting’ can evoke two extremely different reactions from you. You could read it without batting an eye, confident that you’ve already dedicated time to understanding your income and expenses. Or, more likely, you see ‘budgeting’ and you cringe, thinking about how much work it’d take to really do it right. Making and understanding your budget any time of the year can seem like an arduous task. Creating and sticking to a holiday budget? That sounds even trickier.

We’ve broken down 5 steps you can take to create and stick to a holiday budget this year. Don’t let finances put additional stress on you during the most wonderful time of the year. Plan ahead so you can enjoy your family and festivities without fretting over your finances.

1. Identify money already spent

Before you even think about setting your budget, first take a look at all of your expected expenses. These are expenses you can’t really ignore but can plan for. This starts with your usual monthly bills (rent, insurances, bills) then also extends to things that are more holiday-specific, like cost of travel if you’re visiting family (gas, hotels or airfare) and childcare if you’re taking a night off to shop. Do your best to look at past years and bills to determine how much you know you’ll need to spend in November and December. 

Takeaway: Identify the real number or price range you have to spend so you can determine how much flexibility you will have with other holiday expenses. 

2. Make your list

After you’ve determined how much money you need to spend, you can start thinking about the money you want to spend. The easiest way to do this is to start by making a list.

Be sure to put thought into your list. It may be easy to think of family members and friends, but also try to think about expenses that impact your holiday budget: hosting a holiday party or dinner, going out to eat, gift swaps or exchanges, and charitable donations. Now that you’re really facing everyone and everything you want to spend money on this holiday season, you should evaluate the importance and value you want each gift to have. 

Tip: Rather than buying small, forgettable gifts for friends or coworkers, consider suggesting a gift swap or Secret Santa. It controls costs while also allowing you to focus on the quality, not quantity, of your gift!

Takeaway: Budgeting isn’t just about the people on your list. You should also consider things like eating out, buying more groceries or purchasing expensive decorations–these events add up and can blow your budget if you don’t plan properly.

3. Determine your holiday budget spending limit

Now that you’ve considered what money you definitely need to spend and what’s on your holiday list, you can sit down and determine your spending limit. To find out how much money you can really spend, we encourage you to follow these steps:

1. Use a calendar to plan out when you receive your paychecks. This helps you understand your cash flow so you know when to spend (or not spend). It will also help you identify when you should strategically space out expenses across your credit cards.

2. Subtract the “money already spent” in Step 1 from the paychecks you’re expecting. Mentally (and maybe even physically) set aside these funds since they are already allocated to necessary expenses.

3. Look at all of your accounts and determine how much you can spend (in either cash or credit). Then, set a budget that still leaves money in the bank. It can be tempting to want to go all-out, but we urge you to resist. It isn’t worth it to go broke on gifts – make sure you leave yourself room for everyday life events.

Once you’ve decided how much you’re able to spend, you can decide how you want to divide that up throughout your list. You could create spending tiers (like $50 maximum for immediate family, $25 for friends and extended family). Or, you could determine how much you can put aside for gifts and allocate the funds based on what gift you want to give each person.

Takeaway: Consider when you get paid and how much you can comfortably spend when determining your spending limit. Once you know how much you can spend, you can think about how to divide it up.

4. Research and plan (ugh we know) to get the best deals

Black Friday? Cyber Monday? Uh, yes please. Savvy shoppers are looking for great deals year-round, and you should too. Last minute shopping can result in gifts that are less meaningful and more expensive. If you know exactly what you want to get someone, make sure you put aside the time to find the best deal. Finding the most competitive price can easily save you hundreds of dollars, but it does take time and careful planning. 

We also recommend checking to see if you have access to any exclusive deals or perks through your work, bank, social groups or credit cards. Points and cash back rewards can add up, so take advantage of them when you can!

Takeaway: Figure out what you want to get so you can give yourself time to find the best deal. Make sure you’re maximizing your savings by tapping into exclusive deals while you shop.

5. Give yourself some wiggle room

Even the best budgeter can find themselves tempted to stray from their predetermined numbers. Sometimes, the perfect gift just throws itself in front of you and you find yourself wondering how you can justify the more expensive price.

Something to consider that can help you stick to your holiday budget is finding extra, flexible income that can help cover your additional expenses. You could sell unwanted items on Facebook Marketplace, consign clothes you no longer wear, or even find a temporary side hustle or gig. Finding an extra source of income can help you buy more or better gifts, or just be extra savings so you don’t need to worry about paying off any holiday debt you may accrue.

Takeaway: Extra, flexible income can help you buy that more expensive gift or give you money to set aside for after the holidays.

At the end of the day: If you plan for expected expenses, make a detailed list, set a spending limit, hunt down the best deals, and give yourself extra financial padding, you can find yourself merry and happy this holiday season!

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