Don’t be Scrooge: How to Set Up a Christmas Budget That Works

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‘Tis the season to be jolly, Fa la la la la, la la la.”  It is, right? If you don’t have money set aside for Christmas spending, the holidays are NOT quite as jolly.

A LOT of money is spent this time of year.

set up a Christmas budget title

Gifts for everyone on your list.

Buying Christmas cards.

Stamps to mail Christmas cards. Does anyone remember when a stamp was $0.25?

Ingredients for all the baking you want to do.

Food for dishes to pass for every party or family gathering you are attending.

Donations – it seems everyone wants a little bit of your money this time of year. The guilt I have every time I walk by a Salvation Army bell ringer (I promise I give, but not every time I walk by) or say no to rounding up on my bill at a store.

Eating out more because you have less time at home to cook. You’re spending more time tracking down gifts for everyone on your list.

Is there any limit to the spending we do in November and December?

There can be, and the answer is simple . . . A Christmas budget.

Oh boy, there’s that Big Bad B word again that I love to use so much.

Honestly, though instead of being restrictive, a Christmas budget can be freeing. It allows you to spend money and enjoy doing so.

credit cary paying for Christmas expenses

Follow my simple “steps” for how to set up a Christmas budget, and you’ll be singing Christmas carols right along with me all season next year.

8 Simple Steps to set up a Christmas budget that works:

Step #1: Write down every single person you buy gifts for.

I know this may change from year to year, but think about the most recent year. Who did you buy for? Any person you spent even a little bit on should be on this list. Besides just relatives did you buy a gift for your children’s teachers, the mail carrier, the garbage collector, etc. Which friends did you buy for? Don’t forget about stocking stuffers.

Step #2: Brainstorm all of your other holiday expenses.

Do you send holiday cards? If you do include the expense to have them printed, pretty paper, photo cards, and postage. Do you bake for people? Those ingredients aren’t free, and if you just roll them into your grocery budget, you will exceed your grocery budget for the month. Do you take dishes to pass to parties? If there are a lot of them, you may want to consider including this as a holiday expense. Do you drive more at the holidays? If you have to drive far to visit family, stay in a hotel or fly, you want to include those expenses as holiday expenses. What about decorations? Do you buy a real Christmas tree or wreath every year? Do you buy new holiday decorations every year or at least a few? If you are giving gifts, I bet you need wrapping paper, gift bags, tape, etc. Do you do more charitable giving at the holidays? What about Toys for Tots or gifts for an angel tree? Don’t forget to write those down.

If you happen to have receipts from November/December, look them over. They may help you remember some of those expenses and how much they were.

tracking all Christmas spending

Step #3: Time to estimate expenses

Write down every single person you buy for and every expense on the left-hand side of a notebook or spreadsheet. On the right-hand side write down what you spend on each of those people/items. If you don’t know, estimate to the best of your ability.

Once you have estimated for all categories, total all of the amounts together.  That is the total for how much you are spending on Christmas, or at least an estimate.

Now, this might not be exact, but I bet it’s more information than you had before.  This is your starting point for your Christmas budget.

Step #4: Take some time to review the list

Review who you buy for and what you spend money on. Are you certain this is a comprehensive list? Do you feel good about this list and how much you are spending? Would you like to spend more or less on people or things? Now is the time to think about how you are spending your money at the holidays. It can be a great time to reflect and figure out what is important for you to do at the holidays Remember by saying “No” to some things you get to say “Yes” to other things that are more important.

If the total you spend at the holidays is overwhelming and you know you can’t afford it, you must make a change. This step is the most important one for you. You need to prioritize your list so that the most important things are taken care of first, and the others are included if money allows. This is no different than prioritizing in your regular monthly budget. Food, shelter, and clothing are most important on a monthly budget while eating out and a manicure are a luxury only afforded when money allows.

Step #5: Create your Christmas budget

Now you have all of the information, so it is time to create the illustrious budget. Create a document, I prefer Excel, but a simple notebook works just as well to house your Christmas budget. You will have three columns. The left-hand column will be for the expense category. The middle column will be for the amount budgeted, and the right-hand column will be for the actual amount spent. Using the information you collected above you will create a budget for the coming year. For the amount budgeted you will put what amount you want to spend on each category. This amount should not be exceeded come shopping time, so be sure to spend some time deciding the amount.

For prioritizing, I would denote with a star or asterisk the items on the budget that are must do’s. This way if something happens where you are unable (due to job loss, major medical expenses – a true emergency) to contribute the full amount to your budget you will know right away what to focus on.

Sample Christmas budget

Step #6: Saving the money all year

The final step is to total the amount budgeted for each category. Once you have that total amount divide that number by the number of months left until Christmas. For instance, if your amount budgeted was $1,600 and it is January 1 you have 12 months until Christmas. So $1,600 divided by 12 is $133.33. I would round up to $134. You need to save $134/month to fully fund your Christmas budget. If you didn’t set this budget up until July and it was a budget of $1,600 you need to save $267/month because you only have six months until Christmas.

This will allow you to set aside a little bit of money at a time and come November and December you will have enough money to celebrate the holidays the way you want. You will even have money set aside earlier so if you come across the perfect gift for someone in September you can buy it.

how to set up a Christmas budget

Step 7: Update the budget

As you buy things, be sure to update the budget with the expense. This will also help you to remember what things you already bought if you tend to buy some things early in the year. You will also be able to track how much you have spent on someone and how much you have left to spend.

To make your money go further be sure to check out Black Friday deals and what to buy after Christmas. Sometimes we come in under budget due to a great sale on photo cards or cheaper baking ingredients, and we can use that money to buy decorations on super clearance after Christmas.

Sample Christmas budget-partially filled out

Step 8: Finalize the budget after the holiday

After all of your Christmas spending is over, be sure that everything is updated on your budget. All items you bought are listed, and the total spent is calculated Then you will be able to use that information to create the next year’s budget. Barring any big changes, your budget may be similar from year to year. Our last big Christmas budget change happened when we welcomed Amelia into our family.

There is no time like the present to start your budget for next Christmas. I guarantee that once you set up a Christmas budget and it is fully funded you will enjoy shopping more. You won’t worry about when the credit card payment is due or when your paychecks get deposited. Your December monthly budget should not be impacted whatsoever by the holidays because you will have saved and created a completely separate Christmas budget.

I cannot guarantee you won’t be overwhelmed in general, but the cause will not be money.

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