Contributing Writer at Tally
August 30, 2021
The holiday season may seem as though it's far away, but if you’re buying gifts this year, now’s the perfect time to start saving. Taking the time to map out your holiday budget allows you to start putting money away for your Christmas shopping needs.
This article provides you with a complete guide to help you budget for the upcoming Christmas season. We’ll start by outlining why a Christmas budget is so important and then give you some tips on creating your budget. We’ll also provide a few things you can do if you happen to overspend and exceed your budget.
From the highest of levels, budgeting is important because it prevents you from overspending. If you overspend on a credit card, you may take on debt. Credit card debt can be difficult to pay off because of high interest rates that compound.
If you can’t repay debt, your lender will likely charge penalty fees and APRs. Additionally, it could damage your credit score, which will impact your ability to secure lending in the future. Though Christmas presents and holiday shopping are fun, they should not come at the expense of being able to, in the future, secure:
An auto loan
Additional credit cards
Lines of credit
A budget provides you with a spending plan and roadmap. By taking the time to budget now, you will know just how much your Christmas spending will be. Though it may seem early, creating a budget ahead of time allows you to determine whether you'll have enough money for your intended gift-giving.
If you've never put together a budget for the holidays, these holiday spending statistics should put into perspective just how much you need to be saving:
The average American planned to spend $650 on holiday gifts in 2020.
Gifts aren't the only thing needed in the budget. Last year, Americans spent $230 on non-gift items like food and decorations.
Only 18% of Americans are making an effort to pay down debt during the holiday season.
Everyone's situation is different. But even if you only plan to do a bit of gift wrapping for your family members and put out a few cookies for Santa, it's important to have a rough idea of the dollar amount you intend to spend. The earlier you can budget, the better you can plan and prepare.
Ready to start setting your gift budget? Below are a few steps you can take to figure out how much extra money you need for your Christmas savings.
You may have some record of what you spent on gifts in previous years. If so, you'll want to incorporate this data into your budget. If you don't have this information readily available, consider looking at your bank and credit card statements so that you can see your past purchase history.
Knowing this information allows you to better predict what a realistic budget is for that time of year. Remember that costs may go up from year to year, so you should add a bit of cushion from your previous expenses.
You can also determine who you will be buying gifts for and how much you intend to spend on each person. You can set a limit of, say, $50 for immediate family and $25 for extended family. This allows you to put parameters in place and easily track how much you need to save going into the holidays.
Let's say that your target figure for holiday spending is $800. Depending on how far ahead you’re planning, you may have a few months or an entire year to come up with this cash. You will need to look at your current spending habits and incorporate that money into your weekly expenses.
For instance, let's say that it is August 25, so you have four months to come up with an extra $800. This breaks down to roughly $50 per week. You should build that $50 per week into your budget now. Perhaps you skip eating out so that you can .
Essentially, to meet your Christmas budget, you are going to need to find excess cash. Depending on your financial situation, this may mean sacrificing in other areas or running a tight budget to come up with this extra money. If this is not possible, you will need to evaluate how much you intend to spend during the holiday season and potentially lower the amount.
Based on our example above, it is much easier to save $50 a week for eight weeks than to come up with $800 on, say, December 1. For this reason, you should start saving the money for your Christmas budget ahead of time.
Consider setting up a separate savings account that you can use to put aside the money for your Christmas gifts. This account should be exclusively for your gifts so that you're not tempted to use it for other expenses.
Once the holiday season comes, you'll be ready to start spending the money you saved. Consider spending with cash or with a debit card. This way, you limit yourself to the allocated money and put it aside in your savings account. If you run out of money, then you have run through your budget.
If you spend with a credit card, you risk accruing interest if you can’t pay off the balance in full.
There are still ways to have a successful holiday season with loved ones without going over the top. If you struggle to meet your holiday budget, consider suggesting alternatives to the people you normally exchange gifts with.
For instance, instead of doing a gift exchange with everyone in your extended family so that you only need to purchase one gift.
You can also consider making homemade gifts to save money. Additionally, you can think about skipping things like Christmas cards and wrapping paper. You can wrap gifts with newspaper instead.
Though the holidays may seem far away, it's never too early to start crafting your Christmas budget. The earlier you formulate your budget, the more time you'll have to save cash for the gifts you intend to put under the Christmas tree.
By saving cash for the purchases, you'll reduce the likelihood of having to buy things on a credit card with high, compounding interest rates.
Remember, some alternatives can help with budgeting. Suggest a scaled-down Christmas to family members or skip on things like bows and wrapping paper to help you meet your budget.
While creating a Christmas budget may feel obtainable, you may run into complications along the way. You may need to purchase the perfect gift with a credit card. This is ultimately OK, as long as you pay off your card in full by your payment due date.
However, that does not always happen. In these circumstances, consider Tally. Tally is a credit card payoff tool that automatically pays down your debt quickly and efficiently.
Tally makes all of your minimum payments by the due date as well, removing much of the hassle of credit card management. If getting out of credit card debt is on your wish list for Christmas or is a New Year's resolution, then Tally might be a good place to start.
If you happen to overspend on your Christmas budget, there is still a way out of debt. Look into how Tally works to learn more about how the app can help you get out of credit card debt.