Budgeting for the Holidays in 7 Easy Steps

By Jeff Anttila from Redfin

The season for giving is upon us. However, do you know how to enjoy the holidays without breaking your bank account or even worse, going in debt? No one wants to be perceived as a Scrooge to their family and friends, but does anyone really want to spend more than they can afford? Luckily, you can have the best of both worlds. Though budgeting for the holidays may sound like a miserly practice, if you plan accordingly and execute effectively, you can be generous while saving yourself from the lean months after News Year Day. Here are 7 simple but effective steps for budgeting for the holidays.

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Step 1: Create a list of your holiday expenses
Depending on your situation, your holiday expenses will differ from anyone else’s. If you have kids, a large family, work parties to go to, white elephant exchanges, huge dinners you plan to host, whatever, the result is the same: you will spend money this holiday season. So, you can either stick your head in the sand and just hope it all works out in the end and that you won’t be eating ramen noodles for lunch every day in January, or you can play an active role and make sure that doesn’t happen.

Creating a list of your holiday expenses is one of the most important steps you can take when budgeting for the holidays. Without a list, it’s harder to keep track of your expenditures, and things can quickly add up! Soon you’ll find yourself either out of money or relying on your credit cards. The trick is to focus on the broader categories at first, then begin to list out everything you may need for each of those categories.

Step 2: Decide your spending limit
Now that you have your list of holiday expenses, you’re beginning to see the bigger picture and possibly the cost of everything. Before getting overwhelmed by the immensity of what needs to get done and how much everything will cost, you should determine your spending limit. Here you are simply figuring out what that big overall number is. In other words, how much money are you willing to spend on the holidays overall so that you feel comfortable entering 2019? Make it a nice solid number that becomes your cap, that limit you will NOT go over.

Step 3: Assign money to each of your listed expenses
Now that you have that solid number in your head, the best way to stay within that budget is to begin assigning amounts of money to each of your listed categories. This will help you to stay within that budget. Limiting yourself to a predetermined amount may also inspire creative solutions or originality on your part, while also appearing thoughtful in the process.

For example, if you’re hosting a holiday get together and you’re planning on preparing a big dinner you can look for holiday bargains and sales, clip coupons, or ask your guests to bring a side dish to the dinner. Don’t worry, almost everyone is willing to bring a side or a dessert when they’re invited to dinner. On the other hand, if the brisket dinner is going to break the budget, try a holiday chili or roast.

To stay within your budgeted amount for gifts, you can create predetermined smaller amounts for individual presents. For myself, I have in total five nephews and nieces and each holiday season I allocate a $25 limit for each. Sometimes, I may not even spend that much depending on what I find and how thoughtful the present is. In fact, a thoughtful present can often times be less expensive and much more appreciated than an expensive one.

Step 4: Create shopping lists
The great thing about creating lists before going shopping is that you have a greater tendency to stick to only buying the items on that list. If you find yourself selecting random items from the shelf try to acknowledge that you may be drifting from your list and go back to buying only the items you set out to purchase in the first place.

However, you don’t have to be totally strict with your list either while still sticking to it. For example, if you’re shopping for presents you may not totally know what you’re getting everyone but you may have some ideas. By designating a predetermined amount of money to spend on each person while leaving your options open, you can have the leniency you need for being creative and thoughtful in your gift giving and still stay within budget.

Tip: A great way to make sure you stay on budget while shopping is to go to a cash-only system. Leave your credit cards at home so you can’t spend any more money than you have in your wallet.

Step 5: Save money any way you can
There are several examples of how to save money while shopping, including things like clipping coupons, ordering online, and taking advantage of holiday sales. However, beyond the usual tactics, we are all familiar with, there are also other simple ways to save money for the holidays to help boost your holiday spending account, such as:

You can start putting all your spare change in a makeshift piggy bank (I use a mason jar and it adds up quick!)
Sell some stuff you no longer need. You’d be amazed at how fast people want your stuff and how easily you can make a few extra bucks.
Work side projects. Do you woodwork or do crafts of any kind? Try selling some of your projects online to make some extra cash.
Sacrifice your daily latte for your holidays. If you give up your daily latte for the holidays, you can easily accumulate some extra spending money. At $5 per day after tip, you could be saving $25 per week or an extra $100 per month!


Step 6: Track your expenditures
This step is absolutely one of the most important when budgeting for the holidays. Tracking your expenditures is the only way you’ll make sure you stay on budget. Furthermore, if you find that you were able to get away with spending less on food or travel, you can either spend the surplus on one of your other listed holiday expenses, or you can squirrel it away into your savings account.

I use excel to create an easy way to track my purchases, however, you can also use Word or even good old fashion paper and pencil to keep track. The point is to stay within your budget, and tracking your expenditures is the only way you’ll know if you’re doing exactly that.

Step 7: How to get ahead of the game for next year
After the holidays are over you may want to forget about the chaos of shopping and budgeting. But before you do here are a few ideas you can implement to put you ahead of the game next year.

Start saving in January
Even putting a little bit away each month will add up quickly over the course of the year, and when the holidays come, you will be ready. Even $25 per month will leave you with close to $300 come December.

Take advantage of reward credit cards
Several credit cards out there offer cash back rewards, among other rewards and the advantages add up quickly over the year. However, this strategy does not work unless you pay off your credit card every month. If you cannot pay off your credit card each month, do not do this method.

Create a special holiday savings/investment account
These accounts have become increasingly popular. They are simply a separate savings account, CD, or investment, which are specifically used for saving and/or growing money for holiday expenditures.

Start shopping early
Though this can be difficult for most people, including myself, shopping for the holidays (especially for presents) year-round can be one of the most effective methods in keeping to a budget for the holidays. Not only do you spread out your expenditures over the course of the year, but you can also buy items on your list when they go on sale. You will have more opportunity to catch those sought-after items on sale over the course of a year versus hoping to see it on sale in the last couple of months of the year.