Budgeting For The Holidays

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Nov 21, 2024

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In a recent study, 46% of Americans said they are still paying off last year’s holiday spending. Even with the best of intentions, holiday spending can get out of control quickly. Whether you’re excited by Black Friday sales or get caught up in buying holiday gifts to play Santa, the financial stress that follows can be crippling to you next year. Here’s how to master your holiday budgeting and avoid overspending on your holiday purchases.

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Make a shopping list

A holiday budget starts with a shopping list. Make a list of each family member, friend, and neighbor you intend to buy a gift for. After you make a list, prioritize your spending in order of importance. Of course, we would all love to buy a gift for every single person in our lives, that is not always practical or realistic—especially if you have financial goals you are trying to reach.

Open a separate savings account

In the weeks leading up to the holiday shopping season, open a separate savings account just for holiday spending. Allocate a certain dollar amount from each paycheck and deposit in this account. Then when you’re ready to shop, you have the money set aside and ready to go.

You can opt to apply this strategy all year long and take advantage of compound interest with a high yield savings account. Spreading out the cost over several weeks or months can help ease financial strain at this time of year. Having the cash on hand will prevent you from being tempted to put your spending on your credit card.

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Take advantage of Black Friday and Cyber Monday

Most retailers list their savings flyers several days before the actual sales. Plan ahead on what items you need specifically. Remember, there will always be another sale and another good deal. If the item is not on your list, skip it—even if it’s a good deal. This trick will help keep your holiday expenses on track this year.

Before you go crazy for the Black Friday and Cyber Monday deals, make sure the savings are actually a good deal. Retailers often mark-up the prices during the weeks leading up to these huge sales, so it looks like you’re getting a good deal. That being said, there are definitely good deals to be had, just make sure you check competitors prices to see if you're actually saving money.

Plan for last-minute gift-giving

It's inevitable that despite your best efforts you may have forgotten something or someone on your shopping list. Plan for the unexpected. Add a small buffer to your holiday shopping budget. If it turns out you don't need it, then you can put it towards other financial goals or spending categories.

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Use cash back rewards cards and websites

Sites like Rakuten or Top Cash Back offer cash back when you shop through their online portal. You can accumulate the savings throughout the year, then cash out and use the savings to spend on Christmas presents.

You can also use cash back credit cards to save up rewards. Just make sure you are paying your balance off in full each month, so you aren’t paying interest.

Set spending limits

Plan out how much you want to spend on each person or each gift. Remember that it’s not about the amount of money you spend on someone, it’s the thought that counts. It can be tempting to spend more, especially if you're using credit cards. Research shows that people just spend more when they use credit cards than when they use cash. Poor spending habits combined with a high interest rate on a credit card can blow up your plans for staying within your holiday budget.

Map out your charitable giving

The holiday season is an important time for charities. Many organizations raise 30-50% of their annual revenue during November and December. If you want to give to your favorite causes this holiday season, map out your contributions in advance. Rather than donating whenever someone approaches you, be mindful about what charities you want to support.

Check with your employer about donation matching. Several companies will match their employee’s donation to certified non-profit organizations, making your impact that much bigger this holiday season.

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Don’t forget about holiday decorations

Most people think about gifts and parties when it comes to holiday budgeting tips, but don’t forget about holiday decorations. In 2023, 37% of consumers planned to spend more than $150 on Christmas decorations. This category includes gift wrapping, outdoor and indoor lights, gift tags, ornaments, stockings, and a Christmas tree. Even if you reuse most of your decor from previous years, planning a line item in your budget for decor is a good idea to cover the consumable items, or anything that needs to be replaced.

Book your travel early

Holiday travel can cost you a pretty penny if you wait until the last minute. If you are planning to travel this holiday season, booking your airfare and other travel expenses early can help you save. According to Google Flights, for the lowest holiday travel prices you should book anytime between Oct. 28 and Nov. 19.

The bottom line

The holidays can bring up lots of emotions, which can impact our financial decisions. By mapping out who you are buying gifts for and how much you are going to spend in advance, you can protect yourself from overspending this holiday season.

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Holly is a freelance writer who recognizes that there isn’t a one-size-fits-all approach to personal finance. She is passionate about entrepreneurship, women in business and financial literacy. When she is not working, she is testing out new recipes, tasting the newest Trader Joe’s finds or binging the latest true crime podcast. She resides in Utah with her husband, two daughters and dog, Max.

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