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How to Budget for the Holidays

How to Budget for the Holidays


That the holiday season can get quite spendy is not newsworthy or surprising. That doesn’t necessarily make it easier to plan for the rapid and steep upticks in your cash outflows that are common at this time of the year, though. Managing money can be hard in the most non-festive, splurge-inspiring moments — adding the prospect of using your funds to bring joy to others makes it even more difficult.

In this article, we tackle the topic of holiday budgeting like an over-adorned Christmas tree. We’ll also advise on how to get your budget to stick like wet snow on an exposed windshield. This is sure to have you feeling full of holiday cheer!

Holiday Shopping is Seductive

The world has definitely conspired to make you want to open your wallet wide as the gift-giving season encroaches. Many cultural traditions and norms reinforce the urge, and it’s probably human nature to want shiny baubles and once-in-a-lifetime experiences.

It’s no wonder many people get caught up in the excitement and fun. In fact, check out these stats:

  • In 2020, US consumers spent an average of $850-$2,000 USD on Christmas presents.
  • Data from 2019, tallied up $729 billion USD in holiday sales.
  • A third of all Americans went into holiday-shopping-related debt in 2020; their debt averaged almost $1,400.
  • Only 25% of people who take on holiday debt pay it off by the end of the following January, meaning the other 75% are heaping financing charges onto the pile of money owed.

All of the numbers here are trending ever-upward from prior years. So, the economic and cultural forces bearing down on us are effective and significant.

A Holiday Budget Is Nice (Not Naughty)

That said, it doesn’t have to be a foregone conclusion that you’ll fall into the holiday money pit. 

With the right tools — like a reasonable budget, mindset, and a little stick-to-it-iveness — you can make it through another year with your bank account intact. Note that this doesn’t mean you can’t indulge in special seasonal treats for you and your loved ones or help out those in need. You have the power to do it all!

Define Holiday Budget

A budget is a financial planning aid that lists out estimated income and expenses over a defined period of time. When thinking about a budget for the holidays, this tool would specifically reflect the different income and spending trends you anticipate during the festive months (and the subsequent time period needed to fully pay off any holiday borrowing).

Your budget doesn’t need to be high-tech or incredibly complex. It just needs to be:

  • Honest. It should reflect your true income and expenses so that it’s realistic.
  • Clear and concise. It should be well-organized and legible.
  • Comprehensive. It should include a line item for each income and expense category so that it creates a full picture of your accessible financial assets and mandatory financial responsibilities.
  • Kept up to date. It should be kept current as sometimes income and/or expenses change over the course of the budget horizon.

How to Create a Practical Holiday Budget

For some people, a notebook is sufficient. Others prefer using a spreadsheet or other software solutions. The fundamentals will be the same.

The basic elements of a budget are:

  1. Time units. These time blocks will likely be weekly, semi-monthly, or monthly so as to jibe with the frequencies of your bills and/or paychecks. (For our purposes in this post, we’ll be using time periods of “Months.”)
  2. Your income. Be sure to include all sources of revenue. This might include a job, a side hustle, gifts, social security or retirement disbursements, etc.
  3. Your expenses. List out all fixed (the same, predictable amount every time) and variable (can fluctuate each billing period) cash outflows you have. These are all the costs of living — like rent, utilities, tuition fees, savings, and so on. Make your best-educated guesses for the variable expenses.
  4. Totals. You can have one overall grand total, but it may be more useful to have a total of all your cash inflows and all your cash outflows as well as the final profit/loss line.

Making Your Basic Budget “Holiday” Ready

To get your budget in gear for the holiday push, you’ll want to add in space to account for your seasonal spending. There are a few ways to do this.

  1. Plan it in as an expense. If you know that there’s a certain amount of money you’ll need to dispense each month for holiday-related things, go ahead and factor that in as a fixed Expense. Your Totals will take these dollars that have already been committed into account.
  2. Use what’s left-over. If you’re flexible or don’t have a solid idea of what’s a good target amount for you to allocate towards holiday spending, consider skimming it off your profit line. For example, assume that after paying all your bills you’ll have a positive balance in your account — siphon a certain percentage of that money into your holiday fund.
  3. Go hybrid. Use both of the aforementioned approaches! Maybe designate X amount as your minimum holiday budget per month but also let yourself scoop Y% from the “leftover,” post-expenses money.

Sample Holiday Budget

Most examples of budgets run the time blocks horizontally across the top. Everything else is on the vertical down the side (likely the left-hand edge).

Each time block, income source, expense, and total will have its own column or row, respectively. So, for example, you could end up with:

  1. Time: 3 columns that correlate to your defined “Holiday Period” of three months (e.g., November, December, and January)
  2. Income: 2 rows that correspond to your day job and the money you make selling handicrafts online
  3. Expenses: 15 rows that relate to your mortgage, each utility, phone, internet, food, clothing, transportation, healthcare, entertainment, child care, holiday spending, etc.
  4. Totals: 3 rows of totals showing an income subtotal , and expenses subtotal, and the net difference (hopefully a surplus!)

Using Your Holiday Budget

Creating a holiday budget is a giant step in the right direction. If your goal is to spend responsibly during the holidays, having a written-down plan increases your chances of success by over 40%. Your budget helps keep you on task.

How one uses a holiday budget can vary depending upon need and circumstance. In general, you’ll want to update it every time you get income and pay expenses (i.e., replace your initial estimates with actual amounts from paychecks/deposits and payments/bills). This will ensure your bottom line is more accurate.

Beyond that, reference your budget as frequently as necessary to remind yourself of your plan and ensure you know you’re on track. If you can see that you’ve spent all the money you set aside for a given month, you’ll be less likely to make additional purchases. On the other hand, you may find that you still have some financial bandwidth for the month and can get that little stocking stuffer.

The main thing to remember about using your budget, though, is USE YOUR BUDGET. It only works if you actually look at it often and maintain it.

And, to help make sure your budgeting abilities are all wrapped up and tied with a bow, here are some more tips and tricks to contemplate…

Holiday Budget Tips You Can Actually Live With

  1. Don’t “over-engineer” your budgeting tool. Keep it as simple as possible. If all you need is a piece of paper to list and track your cash flows — don’t buy an elaborate bookkeeper program for your computer.
  2. Review old financial records. Look at bank and credit card statements from prior time periods to get an idea of your spending habits and obligations. Past bills and receipts can be helpful when estimating variable expenses.
  3. Err on the side of conservative. Because much of budgeting is based on predictions, and uncertainty is inevitable, it can be smart to low-ball your expected income (unless you have a known and steady amount coming in each month) and overestimate expenses.
  4. Consider leveraging complementary mechanisms. There are numerous ways to go about this. Here are a couple of examples: Many people use the “envelope” method. This is a practice of physically allocating a certain sum of money on a predetermined regular basis into separate containers (doesn’t have to be an actual envelope) marked with the specific purpose for which that money can be used (e.g., an envelope for buying holiday gifts, an envelope for date nights, etc.). Once the money from a given envelope is gone, no more spending towards that purpose can take place. Another popular approach is setting up dedicated savings accounts (e.g., one for Holiday Travel, one for Christmas Party, and one for Charitable Giving) and automatically having a preset amount of money deposited into it periodically. 
  5. Automate wherever possible. If you can have your paychecks direct deposited — do it. If you can pay bills online — do it. If you can record your expenses electronically — do it.
  6. Make your budget mobile-friendly. In order for your budgeting to be successful, you need to maintain it. If you can carry it with you, you’ll have an easier time looking at it to see if you’re adhering to your budget, recording payments and deposits, etc. This is why having a budget in an electronic format or in a small notebook might be handy.
  7. Prioritize. By taking stock of what matters to you — budgeting for holidays will naturally find its proper place in the pecking order. Your well-being is infinitely more important than lavishing gifts on your nearest and dearest or swapping grab bags at the office White Elephant luncheon.
  8. Right-size your celebration. If money is tight, scale back your gift list, shift the paradigm from giving costly individual presents to more economical group-based experiences, or find ways to earn a bit of extra cash.
  9. Take advantage of deals. If you’re going to shop, you might as well stretch your dollars. Look for sales, discounts, coupon codes, rebates, etc.

VCU, An Always Budget-Friendly Gift for Yourself

You deserve a gift, too! And what’s a better present than year-round prosperity and financial wellness? By working with Valley Credit Union, you can make sure you’re on the right path with our expert support.

The dedicated and skilled staff at VCU is poised like a team of rooftop reindeer that’s ready to help your short-, medium-, and long-term money goals take flight. With our many banking products and services — planning, saving, and sensible spending couldn’t be simpler or more convenient.

Contact us today to see how we can help you feel a ho-ho-hole lot more confident and secure in your holiday finances.

And, as always, the VCU family is wishing you and yours the best of health, wealth, and wisdom this holiday season.

About the Author

 Katie ClarkDirector of Administrative Services

Katie Clark has been at Valley Credit Union since 2011. She serves as the Board Secretary and oversees Human Resources, Marketing and Facilities for the credit union, some even call her the credit union mom. As a CUNA and GoWest HR council member she stays connected with the latest industry happenings. When she’s not in the office she enjoys weekends with family & drinking wine at the Oregon coast.

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