8 Tips For Creating A Holiday Spending Plan

With the summer approaching, I know this is the last thing you want to hear. But to steal a line from Game of Thrones, ‘Winter is coming.’ And that means that you need to create a holiday spending plan.

Okay now that I’ve completely killed the chill summer vibes, hear me out. Loads of people spend the first few months each year paying off those holiday gifts that they hadn’t actually saved up for. In fact, many Americans say it will take them over five months to finish paying it off!

We recognize that some of you might still feel like you haven’t yet recovered from last year’s festivities, but the cycle ends here! We want you to avoid the holiday shopping hangover this winter, and with a little planning, you’ll be able to ditch that habit of overspending at the end of the year. 

Creating a Holiday Spending Plan

Unfortunately, the best time to begin creating a holiday spending plan is right at the start of the year. But don’t worry if you haven’t begun one already- now is a great time to start too. These tips will help you feel totally prepared once December rolls around.

1. Look To Last Year For Guidance

The most difficult task on this list is to face up to what you spent last year. This means looking at your credit card and bank statements. Use that data. Learn from it and create your new budget based on those hard figures.

I know it can be tempting to beat yourself up if you overspent last year, but we believe that shame has no place in personal finance. You can’t change the past, but you can learn from it and grow. Taking an objective look at last year’s holiday shopping is a great way to start building this year’s holiday spending plan. 

First: Make a list of people that you’ll likely need to shop for this year. Remember who you bought for last year and then factor in any new friends, lovers, or family members you would like to include.

Next: Recall just how much of last year’s holiday spending was actually spent on gifts for others. Sometimes, it’s easy to shop for yourself while you’re looking for your loved ones or browsing sales! It’s important to be honest with yourself, and see if there are any personal luxuries you could have done without. 

Lastly: Using those previous statements, you should be able to get a clear image of how much money you will need to save up to make this holiday a success without going overboard.

2. Make Some Budget Cuts

So now that you’ve pulled from last year and made a list of what you’d like to spend on again, take the time to see if there are any cuts you can make. 

Is there anyone you don’t need to buy for this year? Did you actually end up spending a lot of money on yourself that you can do without this year? Can your holiday decorations from last year be used again this year?

Pick a few holiday shopping categories to pull back on this year. Shrinking a few aspects of your budget can help you to get creative during the holiday season. For example, if your family hosts and is responsible for a holiday dinner, consider cutting down your food budget and asking everyone to share the expense by bringing their favorite dish!

3. Round Up a Little

Yes, it’s a little contradictory to the point above, but hear me out… For some areas of your holiday spending plan, it could be a good idea to round up and budget a little bit more.

The holidays are supposed to be a FUN time of year. So having too tight of a budget can squash what the giving season is all about. Or, it could be the opposite and tempt you to go off the rails and ditch your budget altogether.

Creating a small overflow section of your budget is a great way to make sure you have some added flexibility to fully enjoy the season. Plus, it can allow you to plan a spontaneous activity for your friends and family.

A great example is splurging on someone who usually receives sub-par gifts, year after year. Since they probably have low expectations, it’s the perfect opportunity to blow their mind and make them feel really loved with an amazing over-the-top gift.

By the way, if you’ve never been able to get into budgeting, be sure to try out one of these Four Easy Approaches to Budgeting!

4. Start Planning (and Saving) Early

Once you’ve tackled steps 1-3 and have come up with the magic number for your holiday budget, it’s important to come up with a plan for how to save that amount of money.

Often, saving small amounts of money over time can feel less intimidating than a large sum. If you’d like, you can divide your budget by the number of weeks left until December and plan to put that amount into your holiday sinking fund every week. If you prefer less transfers, you could also set aside a lump sum each month.

For example: Let’s say you’ve tallied your expected holiday cost and it’s around $800. And let’s say it’s 5 months until December, or about 21 weeks away.  Dividing $800 by 21 means saving just $38 per week!

5. Commit to a Debt Free Holiday

If you’re looking to have a holiday that doesn’t leave you drowning in regrets in the New Year, commit to having a debt free holiday (and maybe lay off the spiked eggnog).

The whole point of saving up money in a sinking fund is to prevent you from using credit cards to fund your holiday shopping. If you struggle to keep from spending more than you have, you could consider using cash envelopes to shop, and leaving your cards at home.

If you love gifting and want to give a little more, try finding ways to free up more of the money you have right now. You could switch cell phone providers, shop around your insurance, or temporarily cut your entertainment budget. It’s all about prioritizing what’s important to you. So if you want to make some sacrifices to buy more gifts, more power to you.

Pro Tip- You can save tons of money for gifts (and more!) by negotiating your bills!

6. Save On Gifts

The earlier you start thinking about specific gifts, the more opportunities you will have to save money on them! Part of your holiday spending plan should be more mindful spending.

Making a list early gives you plenty of time to shop around for sales. This could even mean that you can stretch your budget further! And if you have a few bucks leftover in your budget, you might even be able to get a few extra gifts.

My favorite tip for holiday shopping is to make a list of potential gift ideas by the end of October. Then, you can sign up for emails on all of the websites that sell these gifts and wait. There are tons of sales throughout November and December. These companies will email you whenever their items are being discounted.

Usually, I try to wait until it’s at least 20% off. Just be sure to unsubscribe once you’ve purchased your gifts to avoid future temptation. 

You can also try installing the browser extension, Honey, which searches the internet for different coupon codes and tests them out. I personally have had success with Honey, and while it might not find something every time, it only takes about 2 minutes to set up, so there’s nothing to lose by trying!

Also, don’t forget about thrift gifts, secondhand presents and DIY gift ideas. Putting time into finding or making a gift is usually better than just giving a gift card or money.

7. Discuss Money Expectations

Sometimes it can feel like we get stuck in this loop of trying to outdo ourselves every holiday season. Maybe we worry about disappointing others if the holidays don’t look as extravagant as they did in past years. The best way to alleviate some of this financial anxiety is to discuss holiday expectations with your loved ones. 

I’m going to let you in on a little secret… You’re probably not the only one in your life who is “dreaming of a tight Christmas”. And if you bring up this conversation early, some of your friends and family will be grateful that you were brave enough to speak up!

Implementing a spending limit for gifts is a great way to alleviate pressure all around. Or, you could try a Secret Santa game. Basically, spending a larger amount on just one present vs. many smaller gifts that cost more overall. Talking about this openly will allow everyone to enjoy the holiday season a little more. 

Pro tip: Make sure to explain the reasons why you would like to cut back, or not exchange altogether with people. Telling them about your savings goals, like getting together a down payment for a home, or paying off your student loans, will ensure that they understand this has nothing to do with how much you care about them. 

The people in your life care about you. They won’t love you more for getting them a bigger gift. And they certainly won’t want you to put yourself into a difficult financial situation.

8. Set Kids’ Expectations

For kids, discussing expectations around holiday gifts may be difficult. But in the end, they will have a much healthier view of the holidays if they understand the wider picture. Explain to them that your family values place more emphasis on fun activities and quality time spent together. It’s not all about toys.

At the end of the day, while gifts may be nice, what kids really want is just to have a good time with their families and enjoy some holiday traditions. There are plenty of ways to make the season exciting without going overboard. With a little creativity, your kids could arguably have way more holiday fun on a budget!

If you’re still worried about discussing expectations, be sure to listen to our interview with Meg Nordman on having a Very Merry Minimalist Christmas. In this episode, she shares lots of helpful advice about how to approach conversations about holiday expectations. 

The Bottom Line:

Creating a holiday spending plan in advance will take a lot of the pressure off during the last months of the year. It can also free up your time and energy to enjoy the holiday season much more! Without the stress of knowing you’ll be paying off your holiday debt into the new year, you’ll be able to be fully present this holiday season.

When it comes to the holidays, it’s important to remember what they’re really all about. Spending time with the people you care about, making sure they feel loved and cared for, and enjoying all of the holiday spirit the world has to offer.

For more tips on how to enjoy the holidays on a budget, be sure to check out these related posts:

• Enjoying the Holidays without Spending a Dime
• Avoiding the Holiday Shopping Hangover
• Should You Buy It? Flowchart and Checklist!

Beer From This Episode:

While talking about how to create a holiday spending plan, we enjoyed a Timely Surrender by Archetype Brewing. Another big thanks to Brad and Corina up at Archetype for donating the beers to the show this week! And if you enjoyed this episode, be sure to subscribe and give us a quick review. We’d love to hear from you.

Best friends out!