Get our FREE Guide: 21 Days to a Better Financial Life!
The holidays are fast approaching, and you know what that means. Holiday cheer? Yes. A broken budget? Also, yes. However, you don’t have to be saddled with guilt after the holidays. Today, I am showing you how to do Christmas on a budget as well as tips to make next year’s holiday season less stressful on your wallet!
Average Christmas Gift Budget
The holidays are a time to be generous with family, friends, and many others in your life. With so many people to show you care, it is easy to spend too much.
In 2019, the National Retail Federation expected consumers to spend ~$730 billion, with the average consumer planning to spend $1,047. What’s more, Today reported that the average Christmas budget per child was $271.
I won’t speak for you, but $1,047 is a lot of money, particularly if you haven’t planned for the holiday season all year long.
What’s scarier? Nerdwallet conducted a survey in 2019 and found that 48 million Americans were still paying off holiday debt from the previous year.
The holidays can be a magical time, but much of that holiday cheer can be dampened by a mountain of debt to pay off in the upcoming year. So, take charge this year and learn to do Christmas on a budget, and you’ll find that you enjoy the holidays a whole lot more!
How to Develop a Frugal Christmas Budget
The first step in planning your holiday spending is to get serious about your budget.
Start by looking at how much money you have saved for the holidays. For many Americans, it isn’t much. If it’s already November and you don’t have much saved for the holidays, there are two things you can do.
- Make this year a frugal Christmas
- Plan for next year, so it’s less stressful
Let’s focus on the here and now because chances are, that’s why you’re reading this post!
Use the amount that you have saved to set a spending limit and stick to it. While this isn’t easy, having a game plan is going to make the holiday season much more comfortable. It is also helpful to set a spending limit for each person you need to shop for, as it will make it easier to keep track of the total.
Now, you may be saying to yourself that you have nothing saved. Then what?
We’re going to do a little reshuffling of your budget! Think about the money you have saved for other purposes that you might be able to use for the holidays. For example, were you saving for a vacation? Can you use some of those funds for the holidays?
In general, it’s okay to move money around your budget, as long as you’re taking the money from something discretionary like a vacation fund. Do not, however, take money from a place like your emergency fund to pay for the holidays. And never go into debt for holiday spending.
Tips for Doing the Shopping
Next, if you’ve set a spending limit and have the money available, you’re ready to do the shopping! Here are some tips to help you stay within your budget.
1. Make a Shopping List
Since you have a list of all the people you need to shop for, make a list of all of the gifts you need to buy. Having a list can help you keep on track and not buy things you don’t need.
You may want to consider inexpensive gifts that you can give on a budget. As long as the gift is thoughtful, it doesn’t have to be expensive. Check out this list of 55 inexpensive Christmas gifts if you’re looking for inspiration!
2. Use Coupons & Cash Back Credit Cards
Next, look for ways to save on your holiday spending.
Also, as long as you’re committed to paying your bill in full, consider using a cashback credit card for your holiday purchases.
For example, one of my credit cards often offers 5% back at retailers in the 4th quarter. Check out three of my favorite credit cards to see if they can help you save this holiday season.
Finally, it goes without saying, but don’t use a cashback credit card as an excuse to spend more, and certainly don’t use a credit card if you think you’ll face the temptation to carry a balance after the holidays.
3. Use the Four-Gift Rule
If you’re looking for a creative way to scale back your holiday spending, consider the four-gift rule for those close to you. The four-gift rule states that you buy someone four gifts.
- Something they want
- Something they need
- Something to wear
- Something to read
The four-gift rule is an excellent hack for doing Christmas on a budget without feeling like you’re skimping on the gifts. You’re just taking a pragmatic approach to gift-giving!
4. Consider Gift Alternatives
Finally, consider whether there are alternatives to the traditional gifting experience. For example, many folks do a gift exchange. They’ll buy one gift (usually with a fixed cap on spending), and then the gifts will be floated around from person to person until you end up with a final gift at the end of the night.
Earn More Money for Christmas
If, despite the above tips on identifying what you can afford and ways to save, leaves you feeling short on holiday income, consider ways to earn more money for Christmas!
There are so many ways to earn extra money. If you’re looking for something short-term to make a few bucks, consider driving for Lyft or delivering food for Grubhub.
Or, if you want to spool up your income for the long-haul, look into side hustles like freelancing or even starting a blog! While these aren’t short-term solutions, they can be a long-term answer to boosting your income.
Are you looking for inspiration? Here are 23 great ways to earn extra cash for Christmas!
How to Make Next Christmas Less Stressful
Now that hopefully, you’ve got some ideas to get this year’s holiday under control, I want you to start focusing on next year’s holiday! What? Yes, you heard me, right!
Imagine it’s now next November, and the holiday season is upon you once again. You open your bank account and find that you have $1,047 earmarked for holiday spending! Wow, what a relief that would be!
The key here is setting up a sinking fund for the holidays. A sinking fund means nothing more than setting aside money each month for some future purpose.
In our example, if you spend like the average American, you’ll want $1,047 saved for the holidays. This means setting aside $87.25 every month for holiday spending! If you do this every month, your future self will think you, as you’ll already have holiday spending money when the time rolls around next year!
Make a List of Christmas Expenses
The secret to setting up a functional sinking fund is making a comprehensive list of holiday expenses so that you know how much you need to budget in your sinking fund. Some expenses to think about as you work to develop an accurate total include:
- Food for holiday get-togethers
- Christmas cards
- Charitable donations
- Extra tips for your hairdresser, building superintendent, etc.
Sum up your holiday spending, divide by 12, and that’s how much you need to tuck away every month for next year’s holiday!
And if you’re looking for a way to track your sinking fund, try using a budgeting app like You Need a Budget! It has been a gamechanger for my finances.
The Holidays Don’t Have to be Expensive
Just remember, the holidays don’t have to be expensive. The magic of the season is in spending time with family and friends and showing them just how much you care.
So, use this holiday season as an opportunity to do Christmas on a budget, and then plan for next year to make your next holiday a lot less stressful!
Like this post? Please share it on Pinterest!