January is the perfect time to create a holiday budget. By starting to save now, you can avoid overspending in the future and have a stress free and debt free holiday season.
There are so many special things about the Christmas season. It is a time when we get to enjoy amazing food, spend time with friends and family, decorate our homes, and share our blessings with others.
However, after the holidays, it feels good to clean up the decorations, put the indulgent eating in the past, and start off the new year with a fresh start.
For some of us, it can be difficult to do this when our holiday spending follows us into the new year.
The good news is that Christmas does not have to be a financial burden to you and your family. Regardless of your budget, it’s possible to have a beautiful Christmas season without the hefty credit card bills in January.
Commit To Being Debt Free
Committing to have a debt free Christmas is probably the single most important thing you can do to avoid overspending during the holidays.
Commiting to being debt free now, allows you to make those difficult financial choices later.
If you have a plan to try to be debt free but still rely on credit cards if needed, odds are you’ll use that credit card!
However, if you are fully committed to stick with the budget you have, you will not only be amazed at your creativity, but you will also thank yourself later.
Know Your Number
Before setting up your spending plan, you need to determine what you want to spend for the holidays.
A good rule of thumb that I like to stick to is 1% of our family income or less.
So if your family makes $75,000 a year, you may want to keep your holiday budget at $750 or less. This would include gifts and all other expenses.
Create Your Holiday Spending List
Often when creating a budget for Christmas, we tend to think only about how much we are going to spend on gifts. I have learned that the quickest way to get off budget is to not include all of the other expenses that come along with Christmas. These extra expenses can add up very quickly.
Before coming up with your spending plan for your budget, you need to determine every category of spending you may have. Some of these may include:
- Gifts
- Stocking stuffers
- Food
- Beverages
- Christmas outfits for your kids
- Decorations
- Photos with Santa
- Christmas cards
- Special holiday activities
- Giving
Determine Your Gift Budget
The next step is to create a list of everyone you will be buying gifts for. Once you have your list, determine how much you will spend on each person and get a total.
Create Your Holiday Budget
Once you have determined your categories of spending and your gift budget, determine how much you plan on spending in all categories.
Let’s say that I have $1000 to spend on Christmas, my categories might look like this:
- Gifts- $550
- Stocking stuffers $30
- Food $120
- Beverages $40
- Christmas outfits for kids $0
- Decorations $20
- Photos with Santa $0
- Christmas cards $40
- Special holiday activities $50
- Miscellaneous $50
- Giving $100
Start Saving
Once you create a a holiday budget plan that works, the only thing left to do is to start saving.
Starting in January, we like to save each month in a sinking fund.
To determine how much to save every month you simply divide your overall budget by twelve.
So if my overall budget is $1000, then I know that I need to put $83.3 dollars in our Christmas sinking fund every month.
Benefits Of Sticking To A Budget And Having A Debt Free Holiday
I have had Christmas seasons that ended with credit card debt that I knew would not be paid off in a month and I have had completely debt free Christmas seasons.
I will tell you the difference between the two is night and day.
Knowing that debt is hanging over your head can really take away from an enjoyable and relaxing holiday season.
Choosing to have a debt free Christmas relieves a tremendous amount of stress that can follow you for months or even years.
It also allows you to focus on the true meaning of Christmas. When you have a budget and stick to it, you don’t get sucked in by all of the nonstop spending.
Finally, you are setting yourself up for a debt free Christmas year after year.
Tips To Stay On Budget
- Keep your holiday food bill low by purchasing some non-perishable items in advance. In October, I start purchasing a few non-perishable items I will need for holiday entertaining or baking each time I go grocery shopping. This helps to avoid a huge grocery shopping trip just for the holidays.
- Shop for gifts all year. Keep a copy of your gift list on your phone so it is always easily accessible. When you are out throughout the year and you see something that would make a perfect gift for someone, check your list and see if it is within your budget.
- Create your own gifts. I don’t know about you, but I love receiving homemade gifts. Whether it is a delicious treat or some homemade soap, I know that whoever gave that to me spent time creating it and that really means a lot to me. Homemade gifts are more meaningful and you can usually create multiple gifts for less money than if you were going to purchase them individually.
- Evaluate your holiday needs. Many times we tend to purchase a lot of extras because we tend to think that is what we are supposed to do. Do your kids really need new outfits for Christmas? Do you really need to spend $100 on more holiday decorations? Before spending unnecessarily, ask yourself if your purchase is really necessary or really important.
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