You might think it’s a little too early to start setting up your Christmas budget. But if you want to have zero stress and a hefty fund of savings to pull from by the time Christmas gets here, then guess what? You have to start early. And by early we don’t mean around Thanksgiving. We mean now! You can still enjoy all that autumn has to offer while sneakily stashing away money for Christmas. Your secret is safe with us.
Now let’s get started making that Christmas budget!
What Is a Zero-Based Budget?
First things first. Before we can dive in, you need a little background on zero-based budgets. The concept is simple: Income minus outgo equals zero.
In other words, if you earn $3,000 a month, you want every dollar you spend, save, give, or invest to add up to $3,000. That way you know where every one of your dollars is going.
Not knowing where your money is going can really derail your finances. Without a budget, you might look up one day and find you have no money—and no clue about where it even went. That’s why having a zero-based budget is so important all year long, especially when you are trying to keep your Christmas spending in line.
How to Make a Zero-Based Christmas Budget
In the classic Christmas movie Home Alone, Kevin McCallister makes a plan for how he is going to tackle the intruders in his house—a little glue here, some glass ornaments there, and a couple swinging paint cans for good measure.
What’s our point? Well, just like Kev, you need a plan. The Christmas budget is your plan. Here’s how to make one in four easy steps:
1. Write down your monthly income.
What counts as income? It’s simple—any and all money that comes into your household each month is considered income. This should include paychecks, small-business income, side jobs, residual income, and so on.
You can even include money you make selling items on Decluttr and OfferUp or points you cash out from moneymaking apps like Ibotta and ReceiptHog. Grab a notebook or your favorite budgeting app (we recommend EveryDollar) and begin listing your income. If it’s money that’s coming into your bank account this Christmas season, write it down and add it up.
2. Write down your monthly expenses.
Even though we’re focused on your Christmas budget, that doesn’t mean we can ignore all your normal monthly expenses. Before the month begins, write down every expense you know is coming your way.
Be sure to start your budget with the four walls—that’s your food, clothing, shelter and utilities, and transportation. This includes things like rent, groceries and gas. After those essentials are covered, continue listing your other monthly expenses, such as cable, phones and everything in between. And because your needs vary from month to month, you should make a new spending plan each month.
3. Write down your other expenses.
You know Christmas is in December every year, so there’s no reason to act like it suddenly snuck up on you. Start stashing away money for your Christmas budget now so it won’t feel like it’s hitting you (and your wallet) all at once.
And since we’re gearing up for the holidays, don’t just think about saving up for gifts and forget all the other merriment that comes along with the season. You’ll probably need things like gift wrap, decorations, and ingredients for all those delicious Christmas dishes you make every year. Does your office throw a fancy Christmas party or ugly sweater party that you’ll need festive attire for? Add that to the Christmas budget too!
4. Subtract your income from your expenses to equal zero.
Ideally, this number should be zero, but it might take some practice. Don’t be shocked or worried if your income and expenses don’t balance each other out. This just means you need to do something to bring one of the numbers up, the other down, or both. But whatever you do, don’t spend anything that’s not accounted for. If you budget $100 for eating out and you’re already at $95, shop on the dollar menu. Don’t break your plan!
If you’re spending more than you’re taking home, you need to make some cuts so your income and outgo are equal. To reduce expenses, try buying generic at the grocery store, using coupons or the store’s app, drinking homemade coffee, or catching a carpool to work. If you need to generate more money, start a side hustle or sell some things.
Here’s the deal with a zero-based budget: Every dollar must have a name! That means you must have zero dollars left to budget. If you fill out every item in your budget and come out $100 ahead (meaning you have nothing for that $100 to do), you haven’t finished your budget. You must assign that remaining $100 to something. Whatever you decide is up to you. But if you don’t give it a name, it will be spent carelessly, and you’ll end up scratching your head over that missing $100 you thought you had.
What If You Have an Irregular Income?
If you have an irregular income—don’t sweat it. You can still use zero-based budgeting! It’s just as easy to make a plan for an irregular income as it is for a regular one—really! When you budget, base your income on the lowest earning month from the previous year.
Then list your expenses in order of importance. Make sure you cover the four walls first (food, clothing, shelter and utilities, and transportation).
When you do get paid, take that amount and spread it out over the items in your budget. If your paycheck doesn’t cover everything listed on the budget, that’s okay. Cover what you can. If you get an additional check during the month, pick up where the last check left off.
What Is a Christmas Fund?
Think of a Christmas fund like a savings account that you set up for all your Christmas needs. This is where you will stash the money you save and watch it grow as the season approaches.
When it comes to your fund goal this year, take a look at how much you spent on Christmas gifts last year. Where did you overspend? Is it reasonable to increase your budget or decrease it? Where can you cut back this year? Set a goal amount for your Christmas fund and use your Christmas budget to help you get there! You’ll be amazed at how quickly you can pile up a stash of cash when you make a point to save.
How to Set Up a Christmas Fund
It’s easy to create your Christmas fund! All you have to do is log in to EveryDollar from a computer and insert a budget line item for your Christmas fund. Next, click the “Make This a Fund” feature. Now you can start entering the balance of how much you have saved so far, the amount you plan to save each month, and your long-term goal!
Once you’ve figured out the total you want to spend for Christmas, divide it by the number of months or weeks left until Christmas. For example, if your budget is $1,000, save $500 a month for two months—or save about $330 from each paycheck for the next three months. EveryDollar will track how much you’re saving and how much more you need to save to meet your goal. In December, your Christmas savings will be fully funded, and you can savor the season instead of feeling pinched for extra money.
How to Budget for Christmas Gifts
Oh, Christmas gifts. It’s always better to give than to receive—unless you go over your Christmas budget, that is. Then you just end up with a twisted stomach like you ate some bad Christmas ham, and you can’t even enjoy the process of giving (and you should!). Here’s how to set up a gift budget using our free budgeting tool, EveryDollar.
- Set your budget for Christmas gifts.
Maybe you’ll go the DIY route this year and only need to gather up a few supplies. Your gift budget will look a lot different than someone who’s buying mostly tech items on Black Friday. Whatever amount you decide to spend, just make sure you stick to it.
- Use EveryDollar to set up a new budget group called “Christmas Gifts.”
- Under the “Christmas Gifts” section, create a budget line item for each person on your list.
- Write down how much to spend on each person.
This includes everyone from Aunt Ida to that co-worker you got for Secret Santa this year.
- Keep track of how much you spend or have left to spend on each person.
- Adjust it if you need to.
If you budgeted $70 on gifts for Aunt Ida but hit a few sales and got everything you need for only $50, then take that extra $20 you saved and put it to good use! You can buy Aunt Ida another gift or add that amount to another budget category where you know you might need a little more wiggle room—like your seven-year-old’s Christmas list that seems to get longer by the day! That’s the beauty of your Christmas budget; it can ebb and flow as you need it to.
- Enjoy giving again!
Does Christmas Budgeting Really Work?
Yes! Having a budget (your detailed spending plan) is the quickest way to make your money goals a reality! Saving for Christmas? You need a budget. Trying to get out of debt? You need a budget. Saving for retirement? You need a budget. Already a millionaire? Guess what—you still need a budget.
Remember, you’re the boss of your own budget. You get to tell every single dollar exactly where it will go each month. And don’t think of it as confining. Having a budget actually gives you the freedom to spend money! Who doesn’t love that? Especially during the holly jolly Christmas season.
Saving money for Christmas doesn’t have to be complicated. Believe it or not, you can make a Christmas budget and stick to it! With our free budgeting tool, EveryDollar, you can create Christmas funds and track gift purchases for everyone on your list. Start your Christmas budget today!