Creating a Holiday Budget: The Most Wonderful Time of the Year

Ah, the holiday budget season always approaches so fast. 

One minute you are sipping umbrella drinks in Summer at the beach — and then out of nowhere — you are creating a holiday shopping list, hoping not to overspend this year. 

While the holidays are great for spending time with family, friends, and giving to others — it can also be stress-inducing when it comes to your bank account. 

But there are ways to ensure you stick to your budget and keep your personal finances happy. Below are a few essential tips to ensure you don’t go into debt or overspend this holiday season.

Holiday Spending Statistics

It’s crazy to see stores and online ads for holiday shopping before November even starts. Sometimes it even begins before Halloween even has a chance to slow down.


But at the same time, many people (myself included) like to get a head start on planning and purchasing items before the mad seasonal rush begins. 

I thought before we got into some holiday budget tips, I’d share some interesting statistics around holiday spending. 

According to Cloudways:

  • Gen X wins the award for the highest holiday spending with an average of $782 in the USA and £425 in the U.K.
  • Millennials spend the second most during the holiday season with an average holiday spend of $609 in the USA and £416 in the UK.
  • Baby Boomers tend to spend the least during the holiday season with an average of $576 in the USA and £350 in the UK.
  • Today, the average consumer spends $1,226 on Holiday Gifts

And if you look back on any historical data, you’ll see these numbers continue to rise each year. Of course these are just some averages, so you might typically spend less or even more. 

Additionally, 22% of Americans believe their Christmas spending will leave them in debt according to Fortunly. Yikes!

This is where creating a holiday budget will become critical to helping you avoid debt and not overspending based on impulsive buying.

How To Create A Holiday Budget

As you begin saving for the holiday season, you should create a budget to help you stay on the right financial path. 

Going into debt and overspending is not a great way to go through the holidays and start off the upcoming new year. 

But remember, it’s not just gift giving that adds up either. It’s everything from parties, work functions, decorations, and food. All these things can wreak havoc on your financial goals and debt. 

Here are some tips to creating a simple, but effective holiday budget.

Determine where your spending will need to go this year: 

Start a record of where you know you’ll be spending money. Keeping a tally can help you determine where to allocate savings and when you might need to start saving. 

Include everything, even if it is small items.

Things like:

  • Family members gifts
  • Decorations and gift wrapping
  • Secret Santa or work gifts
  • Food for family events or work gatherings

Additionally, you might want to categorize who you plan on shopping for and spending limits for that person. It’s up to you how specific you want to get with your holiday budget.

Figure out your spending limit for this season

Once you know where you’ll be spending money and what the holiday expectations are, you can set your spending limit. 

You might not know the exact number right away without looking and itemizing every potential purchase, but you can keep yourself to a particular limit. 

This will help you allocate where certain percentages of money can and should go towards.

Don’t drive yourself nuts here, just find a number your comfortable with that:

  • Won’t force you to use credit cards or go in debt
  • Will ensure you can still pay rent/mortgage, bills, and put food on the table

Lastly, you should ensure some wiggle room in your budget. 

Let’s say you are using $1000 as your holiday budget. Conservatively bump that up 10-15% just incase you forgot something (or someone) on your list. Now your total will be $1,100-1,150. 

Your goal of course is to stick to your first estimate, but use that extra 10-15% as a reserve in case you need it.

Start saving for holidays separately

If you are afraid of keeping track of saving in your current accounts, open up a separate savings account that is strictly for the holidays. 

When you know your holiday budget, divide that by how many paychecks you have left. 

Then each paycheck, take that number and send it to your holiday savings account. You can also set it up to automatically take it out of your pay too, that way you don’t forget. 

So based on the example, if your budget is $1,100 and you have 8 paychecks left, you’d need to save $137.50 each check.

This is also another good reason to start much earlier, so the amount taken out is even smaller that you hardly notice the money missing.

Track your purchases to stay on course

Although it might not be fun, if you want to stay on track with your holiday budget you got to track your purchases.

Anytime you buy something, it should be added and deducted from your total budget. 

This ensures you know what is left and how your holiday spending is going so far. You can do this manually with your budget spreadsheet or you can use technology to help.

There are a few apps that can be good for helping your tracking your purchases. A few you might want to check out include:

If you want to track spending, expenses, investments, and net worth all in one place, I’d recommend Personal Capital. Free and easy to use!

Don’t free pressure to spend extravagantly

The holidays are stressful enough, do not add extra pressure on yourself to spend like crazy. Don’t worry about what others are spending or if their gift is more expensive. 

Everyone is at a different place financially, so don’t compare yourself to what others are buying or gifting.

I’ve tended to find more thoughtful or creative gifts to have more meaning than dropping a huge chunk of change on something materialistic. 

If you can afford to spend more luxuriously and are comfortable doing so,  by all means go for it! Just don’t feel the societal pressure to spend lots of money if it is not in your holiday budget.  

Sticking to Your Holiday Budget

Even after you create a budget, it can be easier to start splurging while you are shopping for others.

Honestly, it’s a great feeling to find gifts for people and give presents to others. But you still need to limit yourself.

Most people aren’t going to be okay with you going into debt or financially struggling because you wanted to get multiple or expensive gifts. 

In order to stick to your budget, try doing these few things:

  • Dedicate a few minutes going over your holiday budget. Set phone reminders or email alerts and sit down to enter numbers in a spreadsheet, cross off recent purchases, etc. 
  • Don’t make changes to your budget and spending limit. This is why that is one of the first things you must do. If alterations are needed or you forgot someone/something, work it into your limit and make changes to other potential purchases. Don’t increase your limit or you may continue to tweak more and more. 
  • Take your time with purchases. You might see something that immediately seems like a great gift, but sleep on it first. You may find that item is too expensive and will mess with your budget or you may find it cheaper elsewhere, saving you some money. 
  • Spend less on yourself. Yup, time to cut back on some indulgences if you feel your holiday budget might be tight this year. Although I dislike the cliche advice about cutting back on buying coffee or going out to lunch, it can help you as the holidays approach. Generally, before making a purchase, ask yourself if you really need it and remind yourself how it helps your budget for the holidays. 
Holiday Budget

Holiday Savings Tips

To really make it through the holidays financially, you should begin saving some money aside as early as you can.

That way as the holidays approach, you aren’t stressing about where you are going to get the money to buy gifts or decorations, spend money on food, etc. 

Yet, that is easier said than done when you have bills, potentially debt repayments, trying to save for retirement, or just build an emergency fund. 

If you can start early as in January, you can take a very small percentage of each paycheck to set aside. 

Ideally the above would be what everyone can do, but realistic me knows it’s not possible for everyone. Here are some holiday saving tips to ensure you are prepared for the upcoming season. 

Use a separate savings account

Open one with your current bank or another savings account that you won’t be tempted to use outside of the holidays. I like CIT Bank because of their Savings Builder, but there are a handful of different ones you open an account with. 

Stick to cash purchases to avoid debt temptation

Sometimes going back to the basics of cash will do wonders for saving money during the holidays. Leave your credit card at home so you don’t get lost in overspending or temptation. Debt is not a good Christmas gift, so stick to cash.

Take advantage of sales or coupon codes

Holiday shopping is also a great time to become a master at watching for sales and coupons. If you get a hard start, you’ll find these all over and can really save you money. 

Use cash back apps on purchases

I’ve started doing this myself with Ibotta, but there are numerous cashback apps out there that put money back in your wallet. Not exactly a holiday saving tip, but helps you spend less because your getting money back.

There are cash back apps out there, but as I mentioned I like Ibotta (and it’s free to use!). 

Take on a side job or side hustle that pays right away

Another way to save money for the holidays is take on a side job or even a side hustle that will pay you consistently. Some side hustles and online businesses take time, so don’t rely on that.

Maybe it’s driving for Uber, walking dogs on Rover, babysitting, working part-time at a grocery store or retail store, etc. 

If money is tight, cut back on your own personal spending

You may also need to start cutting back on your own indulgences. If you get a weekly or daily coffee, use that money instead to save towards the holidays for the time being. Don’t go out to eat for awhile, cut cable, etc.

I’m all about treating yourself in moderation, but if money is tight you might need to spend less on you for a bit. 

Sell some stuff if you are still strapped for cash still

Even after all that, you might still be strapped for cash during the holidays. If that’s the case, you can try selling some of your stuff for cash. Host a garage sale, flip stuff on eBay, use Craigslist, or sell things on Facebook Marketplace.

You may have stuff you don’t need or use anymore, which can help add some money to the holiday fund. 

Final thoughts

Don’t let the spirit of the holidays and family stress you out or cause you to end up in some financial struggles.

Set your budget, find your spending cap, and be diligent tracking any purchases.

No one is expecting you to break your bank account for the holidays ( if they are, they probably don’t deserve a gift from you anyway, hehe). And just as important, do not try to compete with how others are spending. 

Work with what your finances allow you to afford, without collecting credit card debt. Plus, never rule out getting creative or sentimental with your gift giving. Many times, those will mean more to others than a random material item. 

Do you create a holiday budget? How do you keep your spending in-check during this holiday season? Let me know in the comments below!