Whether you’re on a tight budget this year or you’re just trying to not go overboard with your holiday spending, it is smart to create a Christmas budget. Budgets put you in control of your spending and make you more aware of where your money is going. They can make the holiday season much less stressful – and can make the month of January much less painless when those credit card bills come in. Additionally, they help you communicate your spending goals and limits with your other family members.
Here are five tips to help you create a Christmas budget:
1. Make a Christmas gift list.
A big part of your Christmas budget will be in the category of Christmas gifts. Start off this task by writing down a list of people you expect to buy gifts for. If you have gift ideas for any of these people that immediately spring to mind, feel free to jot them down but don’t assign any dollar amount to anyone at this point. The idea is just to see how many gifts you need to budget for.
In addition to all of the gifts for family and friends that probably immediately come to mind, don’t forget to consider other possible gifts that often sneak up on us during the holidays. Consider whether you’re likely want to give a gift to your child’s teacher or babysitter, or if your workplace or kids’ school is likely to have a Secret Santa gift exchange. What about hostess gifts? Jot everything down. You will decide in later steps how to handle all of these.
2. Make a list of other holiday expenses.
One of the reasons the holidays can get so expensive is because people tend not to anticipate and plan for all of the actual costs associated with the holidays, and there are often unforeseen expenses that pop up.
In addition to the gift list you’ve already made, think about what other events and activities might be part of your holiday celebrations this year. Will you be hosting any holiday parties or Christmas dinners this year? It’s easy to forget to budget for the extra costs associated with these things. Are you likely to be going to any holiday parties or events that you will need a new outfit for. That should be part of your plan too.
What about your Christmas tree or decorations? Create a category for any new Christmas decorations too.
If you create a category and don’t actually use the money, you can always put it back in the bank or transfer it to another category.
3. Make it official.
It’s tempting to just draft a budget in pencil on a piece of notebook paper and consider the task of budgeting accomplished. However, half of the benefit of a budget is using it as a tracking tool. You’re likely going to lose that piece of notebook paper, spill coffee on it or just toss it. You want to make sure this doesn’t happen, so that you’ll actually be able to refer to the budget, and use it to help keep on track of your holiday spending.
When you make your holiday budget official you’re ensuring that you’re more likely to stick to that budget. It’s worth it; a pile of extra debt after the holidays isn’t fun.
Create a spreadsheet in your computer, or use a special notebook if you really do love the pen and paper idea. There are also handy budgeting worksheets available online. Create a formal budget and a system to track your spending so you can stay on top of your money and in control.
4. Decide how much you can afford.
Once you’ve found a system and created a list of expenses, you can start allocating the money you have to spend to each category. This is often the frustrating aspect of a budget, because we feel there just isn’t enough. There is enough and you’ll feel better staying on budget – I promise.
If necessary, get creative. When you budget you may realize that you’re going to have to make your holiday cards or some of your gifts. Great! You may also decide that instead of buying your child that new computer, they’re going to get a used one. No problem – really, it isn’t. Maybe you’ll decide to make your holiday party a potluck to save some money on your food costs. Great idea! Budgeting helps you focus on where and what you can spend.
Here are some other ideas for saving money on Christmas gifts and entertaining: 7 Tips to Saving Money This Christmas.
Be creative, accommodate your finances and don’t judge yourself. If you find you’re dreadfully short on funds, brainstorm a way to make a bit more cash. Sell stuff on eBay or Kijiji or do some freelance work. Or try one of these ideas to make some extra cash before the holidays. You can do it!
5. Track your holiday spending.
No budget is effective without actually tracking your spending. Look at your budget often. Keep your receipts and enter your spending daily. This is the only way you are going to control your cash. Get everyone in your family on board with the Christmas budget and create a central location for receipts. Show each family member involved in holiday spending the system you’ve set up to track expenses.
Creating a holiday budget is smart. Once the season is past and you don’t have any debt from it, you’ll be committed to creating a Christmas budget each and every year. It is truly that effective!