How do you budget for Christmas? When should you start?
One minute you’re singing about the most wonderful time of the year and the next, you’re slapped with a credit card bill that knocks the wind out of you.
This season is about celebrating and giving so don’t let financial worries overshadow it.
I’m in a few different budgeting Facebook groups and a questions that undoubtedly pops up a few times a week is how much everyone is/should spend on Christmas. The answers vary so widely from nothing to thousands of dollars.
A study from the National Retail Federation shows that last year the average spent on the holidays was $1,007 and that number is increasing each year.
Kirk Jewell from Global Financial Services says, “a good rule of thumb is to spend no more than 1 percent of your overall income on the holidays.” If you make $100k/year, that means $1,000.
According to Census.gov, the median household income is $62,000. If we apply the 1% rule, that would mean $620 is the figure to spend for the holidays.
BUT, that doesn’t mean that’s what you have to spend. If you are currently working your way out of debt or you are saving for your emergency fund, 1% may be a little tough to swing.
- Related: How to Save Money for Christmas
In the same way, if you are in a financial place where you can spend a little more, that’s okay, too. The goal is to not go into debt.
There is nothing wrong with spending money, especially when you’ve budgeted for it.
1. Start Early
The best thing to do is to start saving early. Like January early. Figure out how much you anticipate to spend at Christmas time, then divide that by 12. That is how much you should be putting away each month.
But if you didn’t start early, no need to fret. Try these 10 Christmas side hustles that make money TODAY.
2. See how much you can spend
Check your current financial status to see how much you can spend on Christmas this year without going into debt. If you have $0.64 to your name, you may want to go the DIY route. Some of the best gifts are simple and cost hardly anything to make.
Gifts that are free to give:
- homemade coupons
- back massage
- song
- poem
- drawing
- uninterrupted free time
- scrapbook
- a clean house
On the flip side, if you have an excess of cash burning a hole in your Christmas envelope, now is the time to spend it without guilt because you’ve been saving it!
3. Set your Christmas Budget
Now that you’ve checked your bank account or your Christmas cash envelope to see how much you have available, it’s time to set your budget.
With the ‘rules of thumb’ in mind, how much do you feel comfortable spending?
Set your budget and track it. Write down who you plan on buying for, what gift you’re wanting to purchase and how much you want to spend. Then go back and track what you’ve actually spent. I’ve created a budget tracker specifically for this reason and you can have it for FREE!
Sign up right here to get your free budget!
4. Add up all Christmas expenses
When it comes to budgeting for Christmas, we know we need to budget for gifts. But doing only that is a very easy mistake to make [speaking from experience]. That’s not the only expense this wonderful holiday season brings with it.
Not only should you add up gifts, but if these apply to you, make sure to include: Christmas PJs, Christmas cards, stamps, photographer for taking family photos, gifts for family, friends, co-workers, gift wrapping supplies, stockings + stuffers, activities, Christmas tree, decorations, travel, packaging, etc.
If you have family that lives a ways away and you send them gifts, don’t forget to budget for postage.
Are you wondering how you are going to afford Christmas this year? If you are just now starting, check out my post where I give you ideas on how to save money for Christmas this year.
If you’ve already pinched all the pennies you can, try these side hustles to make money. Lots of stores are hiring seasonal work to cover their busiest time of the year. Or you can freelance!
Next year, start budgeting for Christmas early.
While the holiday season is still fresh in your mind, add up everything you have spent over this holiday season and divide that by 12. That is how much you should budget for Christmas each month.
Looking for more ways to save money for Christmas? Try these:
- 18 Ways to Stay Warm Without Turning up the Heat
- Check Your Subscriptions | Money Saving Challenge
- 4 Money Saving Challenges you can Start Today
- Stop Buying Coffee | Money Saving Challenge
- Save Money by Reducing Your Water Usage
Find this helpful? Share it with a friend!
Now it’s your turn: let me know down in the comments how you stay organized with your Christmas budget.
I start right after Christmas with the budget for next year. We usually use our reimbursement for health items in our flexible spending account for Christmas. Since it is already taken out of my husband’s check, we just submit receipts and put the money aside for Christmas. It has helped a lot! Thanks for all these great ideas!
Wow, love that idea! We had money left over in our flex spending account but could only use it at our insurance’s website… lifetime supply of band-aids anyone? 😉
We keep things simple and only get the kids gifts. We live in a very small space also so we can’t buy them too much. But for those that have lots of presents to buy, having a budget is important.
I hear you about living in a small space. We are very selective of what comes into our apartment!
Budgeting for Christmas is so important! In the past I never budgeted for it and would over spend. Thanks for putting this together!
You are most welcome! This was our first year of really budgeting for it and it was eye opening!
Budgeting for Christmas can be so hard and these are some great tips. This year we actually used credit card rewards to buy Christmas presents for everyone. One one hand, yay! On the other, that means we put some miles on the credit card this year. 🙂
Haha. That’s clever of you to find a way to cash flow Christmas!
Great tips! I have a really big family so it’s always stressful to figure out how to pay for everything! I need to start planning farther ahead! And homemade gifts are a great idea (one of my go-to’s)!
LOVE homemade gifts. Love gifts that you can pour time into instead of money.
Thanks for the printable. This really helps. I always try to start early so I dont feel the money leaving my account
Yeah, it can be a little shock when it all leaves at once!
I think it’s so important to plan ahead during the holidays! Budgeting is definitely key if you don’t wanna find yourself in debt right after the holidays. We fell into that trap quite a few times but we’ve been taking a different approach the last few years. We’ve said no thank you to full on gift exchanges and opt to do secret santa instead and focus more on the family time together enjoying each others company and stuffing our faces of course. It’s one day, I don’t think we should be spending such exuberant amounts of money on one day.It kinda misses the whole point of the season.
I think the secret santa idea is a GREAT one, we’ve been doing it for years. It takes SO much pressure off of the budget. If the season becomes all about gifts and money, we’ve completely missed the point!
This is a good reminder to me to stick to the budget! We always set a reasonable budget, but I tend to go over it every year. I’m determined to do better this year!
You can do it!
It’s never too late to be frugal at Christmas! I find that the last week or two is where the temptation to spend the most comes, even if you’ve been careful and budgeted up till now. That’s because we always forget a few things or something unexpected comes up and the pressure is on! Good reminders to start early and have a plan.
I agree. The pressure is on and paying for convenience is mighty tempting!