Plan Yourself a Merry Little Christmas (Part 1): The Budget

"Hey old man, who the heck are you?"

As I write this, there are 8 weeks left until Christmas. I know I know, how dare I mention Christmas when we haven’t even made it past Halloween! It’s getting pretty hard to ignore when my weekly trip to Costco gives me front row viewing to the giant wall o’ wrapping paper and inflatable Santa-themed yard decorations. A quick run to Walmart with the kids was instantly detoured so that the goobers could check out strings of blinking lights and artificial Christmas trees. My cashier at the grocery store was humming Jingle Bells the other day. Whether you want to hear it or not, Christmas is 8 weeks away.

If you’re anything like me, you’ve fallen privy to the Christmas mad dash: last-minute gift shopping, excessive baking, wrapping until the sun comes up… and then there’s the subsequent credit card bill that always seems to hit the mailbox by December 26th. Just the thought of it all gives me heart palpitations. With a little planning though, you can bypass that holiday anxiety and give yourself the gift of a peaceful Christmas.

There’s so much to do during the holiday season; shopping, decorating, baking, traveling, parties… the list goes on. But none of that is possible without a budget. Ideally you’ve socked away money here and there throughout the year to put towards your holiday spending, but fear not if that minor detail slipped your mind over the past 10 months. Regardless of how much (or how little) you have, the goal is to spend less than what you’ve got.

1. Make a list. 

In this case, Santa knows best. Make your list and check it twice, but don’t limit yourself to the gift-giving kind. Grab a pen and write down all of the expenses you anticipate this holiday season: gift giving, decorations, food, new outfits, travel costs, correspondence (i.e. cards and long distance phone calls), charitable giving and whatever else might suit your holiday needs. Try to be as thorough as possible so you aren’t caught off guard by unexpected spending.

2. Figure out how much you can afford.

How much you can afford to spend on Christmas  should not be dictated by the spending limit on your credit card. Unless you have the money saved up to pay off your holiday spending at the end of the month, don’t put yourself into debt buying gifts with borrowed money. And don’t dip into your emergency savings to fund your Christmas; a holiday that you’ve known about for the past 365 days is NOT an emergency. Be honest with yourself over how much you can afford to spend. Just like in everyday life, if your holiday expenses exceed your income then you either must trim back your expenses or find an additional income to finance your spending. If your wallet is feeling a little light this year, don’t worry; there are plenty of ways to enjoy the holiday on a tight budget (stay tuned, I’ll get into more detail on that in upcoming posts). Once you’ve figured out what you need to buy and how much you can afford, take that list from step 1 and assign spending limits to fit your financial needs.

3. Track your holiday spending.

Hold onto your spending to-do list and use it to keep track of how much you spend on your seasonal purchases. You can jot it all down right on your list, or if you really want to be organized scribble up a simple worksheet containing 3 columns: your expenses, your projected budget for each expense, and what you actually spend. If you end up spending a little extra on Grandpa Pete’s gift than you anticipated, no worries, you can cut back somewhere else in your budget to compensate. Keep yourself updated on where you stand financially through the holiday season, and don’t be afraid to tweak your budget to accommodate any changes

4. Pay with cash.

One of the best ways to spend within your limits is to only pay with cash. It’s simple really, you spend what you have on hand and when it’s gone, it’s gone. You can incorporate a cash-envelope system for the holidays, labeling envelopes with each category you spend in (such as gifts, food, decorations, etc.) and placing the designated amount of cash in each envelope. When you need to shop you take along the appropriate envelopes in lieu of credit cards, effectively avoiding the post-holiday debt hangover. The cash-envelope system comes in particularly handy for receipt organization also, as you can keep your receipts in those same designated envelopes just in case you need them for returns.

5. Don’t wait until the last minute!

We’ve all been there before: aimlessly wandering the stores at 5pm on Christmas Eve, grabbing gifts now and figuring out who to give them to later. Christmas Eve impulse shopping might just be the biggest holiday debt offender, sending us over our budgets as we grab frivolous gifts off the shelf with no particular recipient in mind. Planning out your shopping and doing it well before December 24th will help you save money and your sanity.

Do you create a Christmas budget or just wing it? Let us know how you plan to handle your holiday spending season in the comments section below!

Stay tuned for upcoming posts on frugal holiday gift giving, decorating and celebrating ideas. Don’t forget to sign up to follow the blog and receive new post notifications via email.

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