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Now, I already know what some of you are going to say. “It’s not even Halloween yet! Why would I think about how to budget for Christmas now?” I’ll tell you why. Because if you don’t, you could end up breaking the bank!

Consider, for a moment, how much people spend at Christmas time. On average, an American spends close to $1,000 on gifts every year.

For some of you, that’s a ton of money! For others, it sounds pretty low. However you look at it, you’ve got to plan ahead! Otherwise, you’ll find yourself whipping out the credit card for every purchase. When you do this, you risk getting yourself caught up in the dreaded world of credit card debt.

Now, let’s take a look at how to budget for Christmas without going broke!

How to Budget for Christmas: Where to Start

how to budget for christmas

Believe it or not, budgeting for Christmas doesn’t start in the month of December. To the contrary, your Christmas budget starts at the beginning of the year.

For some of you, that’s way too soon to start thinking about Christmas! But truthfully, you’ve got to plan ahead if you don’t want to break your budget. So, here’s how to start your Christmas budget:

1. Know how much you plan to spend for Christmas

The first thing you need to do is set an amount. It can be $100 or $1,000. Shoot, you can even do $5,000 if you can afford it!

It’s up to you to determine how much you want to spend for Christmas presents. Just make sure you set a reasonable amount that doesn’t compromise your financial goals.

2. Know who you want to give to

Do you feel obligated to give to every friend, family member, and their pet hamster? Well, I’ve got good news for you! You don’t have to get a gift for everyone!

Instead, plan to give to the people nearest and dearest to you. Even then, it doesn’t have to be this extravagant gift.

For this, I’ll tell you what my wife and I do. We typically give a gift to each of her immediate family members. That’s because there aren’t too many of them. Therefore, we can easily budget to buy something for each of them.

However, my family is rather large. Instead, we buy gifts only for my niece and nephew. The rest of us play a game of White Elephant. This frees all of us from having to buy gifts for every family member. Plus, White Elephant is pretty fun!

Of course, if you have extra money, there’s no harm in giving gifts to other people, too. In fact, you may even be in a position to be outrageously generous! Just make sure you plan for it.

3. Create a sinking fun for gifts

Some of you looked at this and immediately thought, “What on earth is a sinking fund?” Allow me to educate you!

A sinking fund is simply a strategic way to save money. You can make sinking funds for big purchases, gifts, large yearly payments, or anything you want. And no, you don’t necessarily have to make a separate bank account for each sinking fund. You can just use an app like EveryDollar to manage and keep track of how much you keep in the fund.

So, what you’ll do is first determine how much you want to spend at Christmas time. For the sake of simplicity, we’ll say it’s $1,000. Now let’s say you want to do your Christmas shopping in November. That means you’ll need to set aside $100 per month from January through October.

Easy peasy, lemon squeezy! Now you can have a stress-free November!

4. Consider buying some gifts throughout the year

Believe me, this will save you some headaches during the holiday season. Instead of risking death by stampede on Black Friday, consider taking advantage of other sales throughout the year.

All you have to do is keep an eye out for awesome sales throughout the year. Or if you see something nice for someone, just go ahead and buy it! It’s okay as long as you have the money in your sinking fund!

However, one downside is that you have to keep up with the gift for the rest of the year. But that’s a small price to pay if it saves you some headaches later.

5. Avoid overextending your Christmas budget

Finally, as tempting as it may be, don’t overextend your budget. What I mean is don’t start going crazy around Christmas time. Instead, spend only what you have saved.

During the holidays, it’s awfully easy to buy something just because it’s on sale. But here’s the truth: that item, whatever it is, most likely isn’t going anywhere. And yes, it will be on sale again eventually.

So don’t worry. Just stick to your budget and nothing else. Also, don’t try to add more just because you planned poorly!

What If I’m Trying to Get Out of Debt?

But what if you’re working towards getting out of debt? How should you budget for Christmas? After all, you don’t want to be one of those people who continuously stay in debt.

If you recall, I said that you do not have the obligation to buy a gift for anyone. This might be hard to hear, but that includes your family and friends.

However, I don’t believe that means you need to leave your loved ones high and dry. Instead, consider some alternatives to expensive gifts:

1. Consider getting less expensive gifts

Did you know that you don’t have to spend $200 on each person in your family? Well, now you know!

Just because you spend less on gifts for one or two years doesn’t mean you love people less. It just means you have a greater goal in mind that will allow you to give even more awesome gifts later!

2. Try handmaking some presents or writing meaningful letters

Do you have nice handwriting? Or do you know how to sew or crochet? Or perhaps you have a knack for woodwork? Try your hand at making gifts for your loved ones!

Some people appreciate the effort of handwritten notes or handmade crafts. Typically, these provide far more meaning and effort than simply buying some trinket. After all, most gifts eventually end up in a yard sale anyway.

3. Offer a “coupon” to spend time with you or offer a way to serve

One creative thing is to give someone a handmade “coupon” or “voucher” to spend some special time with you. You can offer to spend a day hiking, a walk in the park, or a nice dinner.

Furthermore, you can offer to babysit kids, to mow their yard a couple of times, or to cook dinner.

Get creative! You know what your friends and family will love. Tailor your gift to them!

Stick to Your Regular Budget AND to Your Christmas Budget

Before you do anything, make sure you know how to budget. Not only that, but make sure you have a plan in place to succeed with your money.

It’s kind of like when you’re on an airplane. Remember how the crew tells you to secure your own oxygen mask if the plane loses cabin pressure? It’s the same with your finances!

You’ll have a hard time with generosity and giving if you don’t have a plan. Therefore, make a plan so later you can live and give like no one else! Remember your “why” and stay focused!

Finally, don’t let the lack of a Christmas budget ruin your holidays! Make a budget and stick with it!

Resources to Help You

Did you know that my readers can get TWO FREE AUDIOBOOKS through Amazon’s Audible! Seriously, you can sign up for a FREE trial through Audible and get TWO AUDIOBOOKS OF YOUR CHOICE FOR FREE! It’s a no-obligation service, so you can cancel any time and you still get to keep your audiobooks! Click the link below for this offer!

I can’t stress enough the extreme value of Dave Ramsey’s The Total Money Makeover. This is the best book out there on budgeting, getting out of debt, and living generously. Check it out!

Also, check out my other Resources! I have a ton of recommendations that will help you master your finances and discover what’s really important in life!

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