How to Financially Plan for Christmas

Buying gifts for the holidays is a given each year, so this spending should not catch you by surprise or totally disrupt your budget.  If you plan for Christmas spending, you can enter the holiday season feeling confident that you have the money set aside for gifts, as well as having the money you need to cover your typical monthly expenses.

How to create a budget and save for the holidays. Christmas spending | savings | gift buying

Figure Out Who You Need to Shop For

How many people do you exchange gifts with?  Do you have children you buy for?  What about Secret Santas or exchanges with coworkers?

Make a list of everyone that you need to buy a gift for, and decide how much you’d like to spend on each person.

Mr. Farmhouse Finance and I give gifts as a couple, and we have four other couples to buy gifts for (parents and siblings with significant others).  In addition, we have an uncle and a godson to buy gifts for, and do a cousin gift exchange.  We also buy each other gifts.  We usually make fudge or some sweet to share with coworkers.

Set a Budget

Now that you have a list of who you need to shop for, you can decide on a budget.  You will probably spend more on your family than your coworkers, so the dollar amount might differ per person.

Generally, we spend about $200 per couple in our family, sometimes as a joint gift, or sometimes as separate gifts, and around that on gifts for each other.

You do not need to spend a lot of money to give a thoughtful gift, though.  If you have a tight budget, or someone that is difficult to shop for, check out this list of frugal gift ideas from the Frugalwoods.

Put Money Away Each Month

With any large saving goal, it’s less of a blow to your monthly budget, if you spread the saving out over a longer period of time.  I put away $50 a month in a savings account dedicated for Christmas, and add to it each month.  By the time December rolls around, I have the money saved and can begin shopping for gifts.

Some people earn enough that they don’t need to save for Christmas each month, and just adjust the amount they’re putting towards their investments and other goals around the holidays to account for the change in spending.

Either method is fine, just make sure that you’re not scrambling to pay your bills in December and January.

Get Organized and Shop Early

There are some people that like to get their holiday shopping over with by July.  Those people may be a little strange, but then again they might be on to something.

If you shop early, you can take advantage of the best deals you can find, and you will have the greatest selection.

Personally, I do most of my shopping online, so I’ll shop the sales after Thanksgiving.

Going to a mall or participating in Black Friday madness gives me anxiety just thinking about it.

The longer you wait to shop, the crazier the stores get.

Use Your Credit Card to Earn Points

If you’ve saved enough money to cover the gifts you’re planning on buying, use your credit card to make those purchases to earn points.

As a bonus, you’ll get the consumer protection that credit cards offer (such as extended warranties and purchases protection).

Don’t Forget to Save Receipts

Each year, I save all my gift receipts in a folder.  If someone decides to return or exchange a gift, it’s not a problem because I still have the receipt.

In addition, if you don’t make all your purchases on a credit card, it will be easy to add up how much you spent on gifts if you save the receipts.  This will help you plan your budget for next year.

Closing Thoughts

Whether or not to buy gifts, what to buy, and how much to spend are all difficult decisions to make around the holidays.  If you do decide to buy gifts for people, come up with a budget that you feel comfortable with.

You do not need to spend a lot of money to give a generous, thoughtful gift, so make sure you are keeping your monthly budget in mind when deciding how much to save for Christmas.

How do you financially plan for the holidays?

How to create a budget and save for the holidays. Christmas spending | savings | gift buying

Illusion of Scarcity Worksheet (PDF)

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Download this free worksheet and start paying yourself first.

  • Budget for financial obligations and recurring expenses
  • Prioritize your financial goals
  • Make all your transfers on payday
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