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It may not look a lot like Christmas yet, but soon enough the holiday bells will be ringing and stores will be jam packed with shoppers ready to part with their hard-earned money in exchange for a little Christmas cheer.
And, if you don’t create a holiday budget now, you could end up deeper in debt than you ever planned.
I hear all the time from friends and family that budgeting for Christmas makes them feel like a Scrooge and takes the fun out of holiday shopping.
But, once the holiday season is over, they’re the same ones stressed out about their giant credit card bills.
Don’t get caught in this trap. Not only is creating a Christmas budget easy, it’s also freeing knowing exactly how much money you need to create the holiday of your dreams.
In fact, I’m going to show you right now the six simple steps to creating a Christmas budget you can stick to.
Step #1 – Check Last Year’s Expenses
The first step to Christmas budgeting success is to go back and look at how much you spent last year. If you’re a credit card shopper like me, it’s easy to check your statements for the holiday season to see where your money went.
If you didn’t use your credit card or save receipts, make a list of everyone you bought presents for, what you gave them and about how much you spent. Also list holiday party expenses, decorations purchased, event tickets and more.
Once you have a good idea how much you spent last year, you know approximately how much you’ll need to save to make it through this year’s holiday and if there are any areas where you can cut back.
Step #2 – Make a List
Next, make a list of everyone you plan to give a gift to this year and approximately how much you plan to spend on them. Then list any other items you will need to buy. For example will you need a new Christmas tree, will you be throwing a holiday party, or do you and your family take a Christmas train ride (one of my personal expenses since my kids look forward to the Polar Express each year).
Don’t forget to add in all the little expenses that can add up like:
- Wrapping paper and bows
- Charitable contributions
Step #3 – Look at Your Income and Expenses
Now’s the time to get real…
List all of your sources of income and every single monthly expense that comes out of your pocket. Make sure to add in a regular monthly expense of a deposit to your savings or retirement account because you have to pay yourself first.
Are you cash-flow positive and if so, how much?
That number is how much you can realistically afford to save towards Christmas expenses.
So, if you know that you will need $1,000 for Christmas and you can save $350 per month, it will take you almost three months to save the money.
Step #4 – Set Up a Christmas Fund
Now that you know how much you should be setting aside each month, it’s time to set up a Christmas fund.
Either have the money directly deposited into a new bank account that you’ve set up, or keep an envelope for cash in a safe place in your home.
Since I’m a credit card shopper (just can’t pass up airline miles, free hotel rooms and cash back), I use the bank account option.
Step #5 – Go Back to Your List and Trim
Instead of trimming the tree, the next step is to trim your list.
Since it’s easy to overspend, look at your list and see who you can realistically skip buying a gift for and remove them from your list.
It may be nice to buy for everyone, but breaking your budget and going into debt isn’t so don’t skip this step.
Step #6 – Stick to It
Now that you know exactly how much you have to work with and where every dollar should go, stick to it.
Take your budget with you each time you shop and don’t buy a single thing that isn’t already included unless you’re willing to cut that dollar amount from somewhere else.
I find it’s easiest to stick to my Christmas budget when I shop online. When I’m in the store, surrounded by holiday decorations and the constant Christmas music it’s just too tempting to buy one more thing that I don’t need. So, I now do all my holiday shopping from home with my budget by my side – and I save big.
Thanks to the online Black Friday and other holiday sales last year, I actually came in over $200 under budget. Can I hear a Yay!
Give yourself the gift of a debt-free Christmas this year with six simple steps above to creating a Christmas budget you can stick to.
And, if you have any Christmas budgeting tips to share, post them in the comments below.
As always I wish you a strong family, optimal health and smart incomes… and happy holidays too!
P.S. If you’re looking to budget for other holidays, check out this post on 15 Ways to Save Money This Halloween.