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How to Create a Holiday Budget – 8 Ways to Save More Money During Christmas Season

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Is it me, or do the holidays seem to creep up quicker each year? One minute, you’re carving your Halloween pumpkin, and the next, you’re battling crowds for the last video game console for your nine-year-old son. Yes, it’s getting to be that time of year again. And while the holidays might conjure images of juicy turkeys, family time, and carol-singing, they may also bring to mind something less festive: crushing credit card debt.

According to the American Research Group, the average American family plans to spend more than $800 on gifts alone for the holiday season. And 37% of Americans use their credit cards to fund their holiday spending.

In order to combat seasonal budget blues, commit to ditching credit card spending entirely and instead use cash only during the holidays. If you don’t have it, don’t spend it. I discovered that with this approach, planning is everything – and if you plan early, you’ll have a comfortable nest egg built up by the time you start making a list and checking it twice.

Creating a Holiday Budget

Before you begin saving for the holiday season, create a budget in order to determine just how much you expect to spend. It’s important to remember that the holidays aren’t just about gifts. Parties, food, decorations, and treats can all add up. By creating a budget beforehand, you’ll be less likely to find yourself in the red come New Year’s.

1. Determine How Much You Need to Spend

Since the holidays can be expensive, it’s important to break down your spending and allocate funds for everything from cookies to clothing. Here are several of the categories you may need to budget for:

  • Family gifts (an amount per person may work well)
  • Work gifts or treats
  • Food (include baked goods as well as special meals you may be hosting or contributing to)
  • Clothing for holiday parties and events
  • Gasoline or airline tickets if you’ll be traveling
  • New decor for your home, including Christmas trees, lights, and various decorations
  • Charitable offerings
  • Gift wrap and postage
  • Holiday photos and greeting cards

Be realistic about what you can afford to spend. And don’t forget to include a gift budget for each person once you’ve set a maximum spend amount for all the gifts you’ll buy. Also, number the items in your budget according to priority so you can allocate funds appropriately (this comes in handy especially if you’re short of funds). For example, you might decide that giving gifts is your biggest priority, and therefore may have to cut back on buying new holiday clothes for yourself. With a budget in hand, you’re more in control of your holiday spending and less likely to spend what you can’t afford.

2. Set Expectations

To prevent overspending, get a sense of what will be expected of you before you start shopping. For example:

  • Know who you’ll be buying for (and what you plan to spend on them), and who is getting a holiday card instead of a gift. You may want to let friends and family know your plans ahead of time.
  • Talk to your boss (as well as family and friends) about holiday parties. Determine whether you’ll need to bring or buy anything.
  • Consider your coworkers. If you expect to give baked goods instead of purchased presents, give them a head’s up a month in advance so they can adjust their plans (their gift for you) accordingly.
  • Talk to your kids early to get ideas about what they’d like. That way, you give yourself plenty of time to scour for great deals.

To save even more money with family, friends, or coworkers, choose lower-cost ways to celebrate. For example, instead of exchanging gifts with my group of 10 girlfriends, we all go out for dinner. It’s a fun way to celebrate without having to break the bank and buy a gift for each of them.

3. Create a Holiday Account

I have a savings account that I keep open year-round with a mere $5 balance, the minimum amount required by my bank. Come September, I begin transferring relatively small amounts into that account every week based on my holiday budget. By the time the holidays roll around, I have an amount that matches my budget, allowing me to spend from that account. When the money is gone, I’m done – and less likely to overspend.

To create a holiday account, first tally everything you expect to spend, based on your holiday budget. Then, count the number of weeks remaining until your shopping and purchases must be done. Finally, split your budget amount into manageable weekly (or biweekly) deposits to put in your separate bank account. By starting early, you can have a sizeable amount saved up at a cost of only a few dollars per day.

Create Holiday Account

Saving Strategies for the Holidays

Once you’ve budgeted and started saving for the holidays, you may want to pad your holiday account with a little extra money. Or, you may decide to find ways to stretch your tight budget even further. From selling extra stuff to taking on extra work, every little bit helps to relieve some of the financial pressure of the holidays.

1. Start Shopping Early

Starting your shopping early can help save major money – this is because retailers heavily discount merchandise several weeks before the official kick-off for the holiday shopping season (the day after Thanksgiving). By shopping sales and clearance items well before Thanksgiving, you can score great deals on gifts for your friends and family.

There’s another reason shopping early can pay off though: Without a designated “shopping day,” you could spend less overall. The spending atmosphere over the holidays is especially designed to get you to pull out your credit card: The holiday music playing over the loudspeakers; the cinnamon-spice air freshener used in stores; the mob mentality of shopping with a large group. When you shop early, you can avoid all that and simply focus on staying within your budget.

I especially like online shopping for this purpose. By shopping from the comfort of my home, I can browse for the best deal, use coupon codes I find online, and buy without pressure. And, because I have a good chunk of my shopping done before Black Friday, I don’t feel the added pressure or necessity to spend.

2. Sell Some Stuff

Selling unwanted stuff is a great way to build up savings for the holidays – and as an added bonus, it helps you clear clutter. There are a number of ways you can sell old toys, clothes, electronics, movies, home goods, and other items:

  • Have a garage sale
  • Sell online using eBay or Craigslist
  • Launder your gently-used clothes and bring them to a consignment store that specializes in that type of clothing
  • Trade for goods using a site such as Freecycle

Just be sure to exercise caution when selling online. If using Craigslist, always meet buyers in a safe place, and accept cash or online payment using services such as Paypal or Venmo only. Depending on how much stuff you have, you could easily add $100 to $400 to your holiday spending account and get rid of stuff you don’t want anyway.

3. Use Gift Cards

If you know you’ll do most of your shopping with one retailer, purchase a refillable gift card from it. Then, each time you’re at the store, add a little money to the card – and when you’re ready to do your holiday shopping, you can spend what’s on the card. Not only is adding $20 here and there to a gift card pretty painless, it can help keep you from overspending.

To save even more money, purchase gift cards at sites such as CardPool and Raise, which offer cards at discounts of up to 30% off. Then use them to purchase everything from gifts to groceries during the holiday season. You can also give discounted gift cards to family and friends – they’ll never know you bought them on the cheap.

4. Use the Right Credit Cards

If you plan to do the bulk of your shopping at one particular store that offers a store credit card, it may make sense to use that card for purchases to nab the savings. For example, the Target REDcard offers cardholders an immediate 5% discount and free shipping on all purchases. That means if you spend $300 during the season at Target using the REDcard, you’ll net $15 in savings, plus all shipping expenses if you opt to purchase online. Plus, the REDcard can be used like a debit card, so you don’t need to worry about buying with credit and paying off a balance.

As long as you pay off your balances in full at the end of each month (and always stay within your holiday budget), it can make sense to use cash back credit cards and rewards credit cards during the holiday season – especially if you primarily shop online. For example, if food becomes a major expense, a card such as the American Express Blue Cash Everyday card saves you 3% on grocery purchases up to $6,000 per year.

Use Right Credit Cards

5. Give Up an Indulgence

When you’re saving money for the holidays, little regular indulgences can add up. By committing to give up an indulgence (for only a couple months) and swapping it for a lower-cost alternative, you can take the money saved and add it directly to your holiday account.

Consider these swaps to save money in the months before the holidays:

Making these sacrifices during the holidays can have positive long-term effects on your budget, as you may permanently curb some of your daily spending habits.

6. Save Loose Change

One year in October, in an effort to teach my daughter about holiday spending, I challenged her to gather all the change she could find and keep it in her piggy bank. In December, I brought her to a coin sorting machine at our local bank and dumped in the change. While I assumed she’d gathered only about $10 in pennies, she actually amassed more than $80. She took the challenge to heart, cleaning out the change dishes in our house, completing chores for her grandparents for a few quarters at a time, and scavenged for coins wherever possible. I was impressed, and we used that money to help her choose and purchase gifts to give to family members.

I started looking at change differently that year, considering that my daughter had amassed over $80 in a couple of months. Loose change can make a serious dent in your holiday expenses, so choose a designated bank or jar and start keeping loose change there. Cleaning out pockets, going through wallets, and checking your car can yield pretty big results over time.

Your change jar can also be a great source for charitable donations, especially if you think it’s not really in your holiday budget to give. A lot of change goes unspent and forgotten in wallets and purses anyway – why not give it to a great cause instead? Donate your change jar to a local shelter, or use it to purchase anonymous gifts for someone in need.

7. Work on the Side

Don’t underestimate the power of a side job. Whether you have a full-time position or are a stay at home parent, it’s possible to use the few months before the holidays to earn a little extra money without having to completely overhaul your career or disrupt your day. The trick is to make sure you keep all of the money you make from side jobs in a separate account, ready to spend during the holidays.

Here are several simple ideas:

  • Tutor kids after school or online
  • Begin a home-cleaning service
  • Babysit for neighborhood families
  • Dust off your photography skills to create holiday cards
  • Sell homemade goods on Etsy
  • Check out online classifieds for temp positions (which are plentiful during the holiday season, particularly in retail)

It doesn’t take much to add a little padding to your holiday account, as long as you’re willing to put in the hours. Working retail during the holidays may not be your dream job, but it can definitely help you avoid crushing debt.

8. Complete a Financial Fast

We can all spend a little thoughtlessly from time to time. Therefore, a financial fast serves two purposes: It allows you to save money for the holidays while identifying areas in which spending could be cut back.

A financial fast is just what it sounds like: You go a predetermined amount of time (usually a week) without spending anything. Start by looking at your budget and estimating how much you spend per week. Then, choose areas in which need to spend while on the fast (such as paying bills or buying gas for your car), and areas where you can cut spending. Then, set a start and end time for your fast and get going.

You’ll be surprised at how quickly you adapt to using on-hand staples to cook meals, staying home on the weekend for entertainment, or exercising at home to save money you’d normally spend. When the week is over, you can take the money you saved and add it to your holiday savings account. You might even be inspired to change some of your habits to save money on a regular basis.

Complete Financial Fast

Final Word

The holidays might be the most wonderful time of the year, but they’re also the most expensive. However, there’s still plenty of time to get busy and start saving now so that you can enjoy them without dreading the bills in the mail afterward. By planning ahead and knowing your budget, saving money for the holidays may turn out to be the easiest part of the season.

How do you save money for the holidays?

Jacqueline Curtis
Jacqueline Curtis is an experienced style expert, and she focuses on getting high fashion on a tight budget. She writes for several online publications and specializes in fashion, finance, health and fitness, and parenting. Jae grew up in Toronto, Canada, but now resides in Utah with her husband, two kids, and prized shoe collection.

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