Never Overspend On The Holidays Again With These 4 Budgeting Ideas

Written By
Paul Tracy
Updated January 16, 2021

The only way to control my tendency for extreme gift giving is to create a holiday budget. Since no one budget fits all, I've provided four ways to budget for the holidays. Pick one, follow the directions, and then we'll bake sugar cookies.

Budget No. 1: For every person in your immediate family, add $50. For every blood relative outside your immediate family with whom you traded gifts last year, add $25. For every close friend with whom you exchanged gifts last year, add $15. For every co-worker, neighbor, and casual friend you plan to swap presents with, add $5.

For example, your spouse would add $50 to your budget, three children would mean piling on another $150, two brothers would be $25 each, three friends increase your budget by $45 total, and one co-worker (Just one? Apparently, you hate work.) is $5. That comes to $300 for 10 gifts.

Add it up, and that's your Christmas budget. Don't spend a penny over, or you'll incur the wrath of your credit card bill in January. The shock to your poor system will be akin to a sugar crash, but it lasts longer and charges double-digit interest.

Budget No. 2: Speaking of credit card bills, check the total of your spending tab from last Christmas. It's probably your January statement.

Write down what you spent on Christmas gifts last year, then use this handy interest calculator to see how much those gifts will end up costing you if you take the entirety of next yaer to pay off the bill.

For example, if you spend $500 on gifts, take 12 months to pay it down at 20 percent interest, and you'll end up paying $46.32 a month. That adds up to $55.81 in interest. Why give that money to your lender?

If you paid off your holiday bill in full last year, congrats! You have my permission to spend the same amount this year. If it took you up to three months to pay your bill, reduce what you spent last year by one third. If it took you six months, reduce what you spent last year by one half. This is your new holiday budget. Better luck next year.

Budget No. 3: Talk to your family about doing a secret Santa gift exchange -- everyone buys one gift for the person whose name they draw. The first year we did this, I actually enjoyed Christmas shopping because there were so FEW presents to buy. Agree to a dollar limit and stick to it. With so many names scratched off your list, you should have no trouble buying gifts for those outside the pool, like friends and children.

Related: Simple Secrets To Slash Your Holiday Travel Budget

Budget No. 4: Add up your take-home income for an average month. Write that number down on a piece of paper. Subtract your monthly housing payment, your car payment, your average monthly credit card bill, and whatever other regular expenses you incur.

After your subtractions, add in any other regular income you receive from side jobs, Social Security and generous relatives. The number you see before you is what you have to spend each month, after all your bills are paid.

I call this the "money pot." Subtract whatever you buy from this number, and you'll never spend more than you make. Carry around an index card or make a note on your smartphone.

What does this have to do with Christmas? I didn't forget. How much of your money pot do you want to spend on gifts? All of it? What about gas to get to work? And food to fill the tummy? Be reasonable, but realize that the more you skimp on meals out, the more gifts you can buy.

Bonus: No matter what budget you chose for Christmas, if you stick to it, reward yourself with everyone's favorite holiday trend -- self-gifting!

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