Seasonal Budgeting Tips: Holiday Edition (Special Edition)

The holidays are supposed to be a time for enjoying family, celebrating traditions, and making memories. Unfortunately, they can also become one of the most expensive times of the year.

Between Thanksgiving dinners, Christmas gifts, travel, decorations, parties, and all the other expenses that seem to appear between Halloween and New Year’s, holiday spending can add up quickly.

The good news? You don’t have to avoid holiday spending—you just need to plan for it.

Here are a few simple ways to keep your holiday spending from turning into a financial hangover in January.

Set Your Holiday Budget Before You Start Spending

One of the easiest mistakes to make is buying things throughout November and December without ever deciding how much you’re actually willing to spend.

Instead, set a total holiday budget before the spending begins.

Consider categories such as:

• Gifts
• Thanksgiving and holiday meals
• Travel
• Decorations
• Parties and entertainment
• Charitable giving
• Other seasonal expenses

You don’t necessarily need a complicated spreadsheet. Even a simple number written down can help.

If you decide that you’re comfortable spending $1,500 throughout the holiday season, you now have a limit to work within.

The important part is that your budget should be based on what you can afford—not what you feel obligated to spend.

Make a Gift List—and Stick to It

Gift spending can get out of control quickly.

It’s easy to see a great deal and think, “They would love this!” even though you already bought them something.

Before shopping, make a list of the people you’re buying for and determine approximately how much you want to spend on each person.

For example:

Person	Budget
Spouse	$300
Child #1	$200
Child #2	$200
Parents	$100
Siblings	$50
Friends/Other	$100
Total	$950

The numbers will obviously look different for everyone. The point is to establish the limit before you start shopping.

And most importantly, remember: a sale isn’t saving you money if you weren’t planning to buy the item in the first place.

Don’t Forget the “Small” Expenses

Holiday budgets often account for the big purchases while ignoring the smaller ones.

But $20 here and $30 there can add up surprisingly quickly.

Think about:

• Holiday coffees
• Christmas decorations
• Wrapping paper
• Stocking stuffers
• Holiday parties
• Food and drinks
• Shipping costs
• Holiday-themed activities
• Last-minute purchases

None of these expenses are necessarily problematic. They simply need to be included in the plan.

Use a Sinking Fund If You Can

Ideally, holiday expenses shouldn’t come as a surprise.

If you know every year that Christmas is going to cost you $1,500, you could set aside $125 per month throughout the year.

Then, when November and December arrive, you already have the money available.

This is exactly what a sinking fund is designed to accomplish: saving gradually for a known future expense.

And if you didn’t start saving in January, that’s okay. You can still start now and adjust your spending accordingly. It wouldn’t be a bad idea to add it to your New Year’s resolutions as well.

Be Careful With Credit Cards

Credit cards aren’t inherently bad, but using them to spend more than you can afford can create problems long after the holidays are over.

If you can’t pay the balance off, the interest you pay may significantly increase the true cost of those holiday purchases.

There’s nothing wrong with using a credit card for convenience, rewards, or fraud protection if the money to pay the bill is already accounted for in your budget.

The problem begins when the credit card becomes a way to spend money you don’t actually have and won’t be able to pay off.

Give Yourself Permission to Spend

Budgeting doesn’t mean you have to be the person who refuses to spend a dollar during the holidays.

Quite the opposite. A good holiday budget should give you permission to spend.

If you’ve planned for $1,500 of holiday spending and you stay within that amount, you shouldn’t feel guilty about enjoying it.

Don’t try to spend as little as possible. Instead, try to spend intentionally so that the things you buy actually contribute to the holiday experience you want.

My Two Cents

The holidays shouldn’t be something you financially recover from in January. Set a budget, make a plan, account for the small expenses, and spend within your means. But most importantly, remember that the best holiday memories usually aren’t created by spending the most money. A little planning now can help you enjoy the holidays without carrying unnecessary financial stress into the new year.

– Brendan Tiedeman, CPA, CVA

Disclaimer:
This article is for educational and informational purposes only and should not be considered tax, legal, investment, or financial advice. Individual circumstances vary, and readers should consult with a qualified financial professional before making financial decisions.