Smart Budgeting Tips for the Holiday Shopping Season

The Squeeze:

• The holiday season brings with it all kinds of extra expenses — making it very important to have a budget in place that helps you adequately plan what you can actually afford.

• Your budget should include far more than just presents you plan to buy: also include the added costs of holiday meals, decorations, additional travel and any charitable contributions you make each year.

• Staying on target with your budget once the holiday season is in full swing can also be a challenge, but using a budgeting app (like Firstly!) can help prevent overspending.

 The holidays are just around the corner, which means it’s time to make sure you’ve got a spending plan in place for the season ahead and the whirlwind of festivities (and extra costs) it brings.

From spending on presents and decorations, to hosting parties and traveling to visit family, expenses quickly add up and catch us by surprise. Which is why it is so critical to head into the holiday season not just with a wish list, but with a thoughtful, well-planned holiday budget that can keep you on track. 

Here are some tips for drafting a holiday-season budget as well as a few helpful hacks for staying on target once all of the merriment is in full swing.

What to include in a holiday budget

The earlier you create a holiday budget, the better. Doing so will not only help you stay organized for your spending in the season ahead, but it can also help you avoid forgetting items — and then find yourself paying through the nose to gobble-up last-minute rush purchases, says Rebecca Gramuglia, a consumer expert at TopCashBack. “Plus, you’ll be able to watch for any noteworthy deals and decide if it’s worth buying some things ahead of time,” she adds. 

But what should be included in your holiday budget exactly? How about: everything? The non-profit organization ConsumerCredit.com says your budget should be very thorough, and account for the following: 

• presents
• entertaining costs
• special family holiday meals
• decorations, holiday cards (and postage!) and gift wrap
• travel expenses, whether it’s gas for going to see Grandma or plane tickets to go further afield
• charitable donations 
• festive clothing (like those striped PJs you and your family wore for the holiday card photo, right?)  

“You should also think about other areas where you tend to spend more over the holidays,” recommends budget living expert Andrea Woroch. “This could include groceries for out-of-town guests and increased food spending for family gatherings and other holiday parties, or even baking cookies and treats for fundraisers or your kid’s school parties.” 

Speaking of children, you may also have to spend an increased amount on childcare during the holidays if you’re planning to attend any adult-only celebrations. This too should be factored into a holiday budget. 

To help come up with ballpark costs for each line item in your projected holiday budget look at last year’s spending.

“Just pull up your bank and credit card statements from November and December to get a better idea of how much you spent on different items, from travel to hostessing to gifts and decor,” Woroch advises “This can be used to determine your budget baseline.”

One caveat here, consumer prices across many product categories have gone up substantially in 2021 compared to 2020, particularly food — so “add some extra buffer to your budget,” says Woroch. “There have been reports that prices for toys will be up anywhere from 5 percent to 10 percent, which can really impact a family’s spending this holiday season.”  

Make a definitive plan to cover your extra spending

Here’s another important point when it comes to creating that oh-so-helpful holiday spending plan: you need to establish a firm limit for the seasonal splurging, i.e. how much you will spend above your normal monthly budget. 

“To determine how much you have available for the holidays, create a rough list of your typical monthly expenditures and subtract that from your monthly income. If the result doesn’t give you enough [for your projected holiday spending], consider diverting automatic savings from another area for just one or two months,” says smart shopping expert Trae Bodge. “And if that still doesn’t do it, give something up for a couple of months, such as your regular car washes, and Starbucks habit. And set that money aside for holiday shopping.”

That is, of course, the beauty of a budget: it allows you flexibility when additional expenses are on the horizon, since you can easily see where you will need to cut back.

Rely on cash, not plastic

Ideally, you should be covering all these additional seasonal costs with cash, rather than running up debt. And if cash is tight, try getting creative with gifts, rather than relying on using credit cards, says Bodge, especially now when interest rates are starting to creep up (even though the Fed is holding rates at an all-time low into 2022) and supply-chain disruptions are pushing up prices.

"Find gifts that you can DIY,” says Bodge. “You can cook something or check out YouTube for easy-to-follow video tutorials for things like herb sachets, festive holiday decorations, and handmade journals.” Be creative to keep yourself out of a holiday-spending hangover come January. 

There’s also plenty of ways to scale back the costs of holiday feasts to keep your budget in check. 

“Ask family and friends to contribute with their favorite dish and use the decor you already have,” says Woroch. “And rather than buying everyone in your family or circle of friends a gift, set up a secret Santa exchange so each of you has to buy only one gift.” This still allows for a fun gift exchange — especially if you make it a Yankee Swap, where hilarity ensues as people angle to “steal” the best gift. 

Put your budget in writing and track spending as you go

Making a budget is one thing; actually following it is where the victory (and savings) lie. There’s a variety of ways to do this.

For instance, you could search Google Sheets to find a budget template that allows you to enter each holiday expense category and then track your spending throughout the season to ensure you’re not going overboard. ConsumerCredit also offers its own holiday budget template that can be downloaded, as well as a holiday shopping checklist. Budgeting apps — such as Firstly — are another very helpful tool during the holiday season, says Woroch. And “apps like Santa’s Bag can help track gift purchases and overall holiday spending,” she adds.

Bodge also recommends the free gift budgeting apps such as GiftPlanner for iOS or GiftListDiary for Android, to help establish a holiday budget and then track spending. “Both apps allow you to list recipients, enter gifts ideas, and track spending,” explains Bodge.

Be savvy in how and when you shop, for savings

Use smart shopping hacks and moves to keep your spending goals intact. For instance, you could start shopping well in advance for holiday gifts. “If you start shopping and buying a gift here and there, it allows you to manage your cash flow better and alleviate the financial pressure you feel when trying to buy everything at once,” says Woroch.

In addition, Woroch says last year consumers spent more on holiday decorations to make the season feel extra cheery, given the hardships 2020 included. “Look at local listing sites like OfferUp to see if you can find gently used décor or you might even head to a thrift shop like Goodwill. I’ve found seasonal items there in the past for less,” says Woroch.

The bottom line, says Woroch, is that creating a holiday budget is not meant to be complicated. There are so many tools available these days to help with the task. And a little advance planning can go a long way in creating savings, as well as an enjoyable holiday season you’ll long remember — and not regret, come January.