The Christmas Budget You've Always Wanted

7 Minute Read

In the classic Christmas movie Home Alone, Kevin McCallister made a blueprint for how he was going to take down the intruders in his house. He knew all he needed to outsmart the Wet Bandits was a plan of attack. A little glue here, some glass ornaments there—and a couple of swinging paint cans for good measure.

What’s our point here? Well, just like Kevin McCallister, you need a plan. And a Christmas budget is that plan. It will lead you to success, but only if you follow it!

While it’s perfectly okay to spend extra money around the holidays, you don’t want to end up with the unwelcome gift of credit card debt come Christmas morning. That’s why you need a Christmas budget. Creating the right Christmas budget really starts with having the right household budget in place. We recommend using a zero-based budget for that. Here’s a quick refresher:

What Is a Zero-Based Budget?

The concept of a zero-based budget is simple: Income minus outgo equals zero. If you earn $3,000 a month, you want every dollar you spend, save, give, or invest to all add up to $3,000. That way you know where every one of your dollars is going.


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How to Create Your Christmas Budget

1. Take a look at what you spent on Christmas last year.

Let’s go ahead and address the question on everyone’s mind: How do you figure out your Christmas budget? Take a look at what you spent on Christmas last year. Was it too little, or too much?

This is where our free EveryDollar app really shines. Start by plugging in your normal monthly expenses like gas, utilities, insurance and groceries. Then, enter your more flexible spending budget groups, like dining out and fun money. What’s left? Will that be enough for Christmas? If not, you may have to adjust some of that flexible spending to make it work.

If you typically spend $300 on restaurants in a month, why not cook a few extra meals at home and stash an extra $200 toward Christmas savings? Or if your fun money is sitting pretty at $150 a month, why not hold off (temporarily) and put an extra $100 into your Christmas fund? Smart budgeting now can free up more money for what you want later—like Christmas presents!

2. Divide your Christmas budget into categories.

Of course, gifts are usually the largest Christmas budget expense (unless you’re decking out your house Clark Griswold style). Just remember you need to budget for all things Christmas—including decorations, wrapping paper, travel, festive meals, charitable donations, and anything else you’re planning to do over the holidays.

Once you’ve figured out how much you can spend on Christmas, do some simple math. Take your number—let’s say $500—and think over your seasonal expenses. You’ll need money for travel ($50), a tree and trimmings ($70), a few potluck parties ($30), and some extra giving ($50). Then there’s the big one: Christmas gifts ($300). Make a goal amount and stick to it! You’ll be amazed at how quickly you can pile up a stash of cash when you just make a point to save.

Now that you have your Christmas budget all set, you know how much you’ll need to add to your Christmas fund. As long as you plan where your money will go before you spend it, there’s no right or wrong way to split up your Christmas budget. Plus, if that Douglas Fir goes on sale or you throw a potluck to cut back on groceries, you’ll have more money to splurge on your loved ones.

3. Write down who you need to buy gifts for.

Since you know exactly how much you can spend on gifts, decide who gets what. Make a list of everyone you’ll buy for this year. And we mean everyone—coworkers, church friends, parents, kids, grandkids. Next to each name (or category, if you’re budgeting a treat for the office), write a specific dollar amount.

If you don’t have enough money to cover everyone on your list, rethink how much you’ll spend on each person. Maybe you can agree to only buy for the kids. Or perhaps you can draw names instead of buying for multiple families. And baked goods or homemade crafts are always on the table! Who doesn’t love a gift that comes fresh out of the oven or straight from the heart?

4. Track your spending.

So how do you know if you’re sticking to your budget? You have to make a point to track every single expense. A $5 overage in one category might not be the end of the world, but it’s not going to be pretty if you do that in several categories throughout the month.

And don’t wait until the end of the month to add up all those Christmas receipts. By then, it could be too late and you might be way over budget. Try to track the expense as soon as you make the purchase. Our EveryDollar app makes that super easy. You can do it on the go right from your phone.

5. Consider using cash.

If you haven’t used cash to pay for Christmas presents since 1985, it’s time to tap into the You of Christmas Past. If you know you’re prone to overspending when it comes to Christmas, make a point to set aside cash only to pay for all the Christmas things. Make separate envelopes for decorations, festive food, gifts, and anything else you plan on spending money on this Christmas.

6. Plan ahead with a Christmas fund.

You know Christmas is in December every year, so there’s no reason to act like it suddenly snuck up on you. Start putting away money for Christmas now! We recommended setting up a Christmas fund using EveryDollar. It’s easy! Simply log in to EveryDollar from a desktop computer and click the "make this a fund" feature.

Once you’ve determined the total you want to spend on Christmas, divide it by the number of weeks left until Christmas. If your budget is $600, save $100 a week for the next six weeks. EveryDollar will track how much you’re saving and how much more you need to save to meet your goal. In mid-December, your Christmas savings will be fully funded and you can enjoy the season instead of feeling pinched for extra money.

Does This 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.

Did you know you can get transactions from your bank account linked directly to EveryDollar? It makes Christmas budgeting that much easier! Sign up today for EveryDollar Plus to start using the easiest budgeting app on the planet.

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