It’s that time of year again – time to sit down with a pad of paper and a pen (or your trusty smartphone) and construct a Christmas budget. Since you’re in a planning mood, here’s today’s article to help you out.
WHY MAKE A CHRISTMAS BUDGET?
Obviously, you want to keep yourself and your family financially secure through the holiday season and afterward. As a result, you think a little planning on the front end could help you stay satisfied (and solvent, of course) once the dust settles. Plan now so you don’t have to deal later with the fallout of less-than-optimal choices.
Maybe this is the first year you’ve ever budgeted for the holidays. Previously, you just played on the fly, but not this year. It’s time to step up your organization game. On the other hand, maybe you create a Christmas budget every year. But you’d still love some extra thoughts before you dive into the task this time.
IT COULD BE A GOOD IDEA BECAUSE…
So, let’s enumerate some potential benefits of making a Christmas budget:
First, use budgeting to give yourself a roadmap for your expenses this time of year. Go into your shopping and entertaining with both eyes open financially.
Allow budgeting to help you steward the money you do have wisely. When it comes to spending, don’t just spend, spend well.
Next, budgeting could help you prevent overspending. If you commit ahead of time to stay within a certain dollar amount, it may help you avoid spending your money too freely.
Correspondingly, budget the money you’ll be spending on the holidays so you don’t have any unwanted surprises come January and February. Your future self will be pleased that you left enough money for the bills you encounter after the holidays.
Making a Christmas budget could be a smart way to save you from yourself. Thus, let your budgeting side save you from any excesses of your “shop-happy” side.
Similarly, budgeting may help you steer clear of impulse buying if that’s something you’d like to avoid.
ENJOY THE WHOLE PROCESS
We suggest you make the process surrounding your planning, budgeting, and purchasing a whole lot of fun. Actually, embrace it. Great idea, you say, but how?
For starters, use the helpful tools at your disposal. But, especially, use those tools that you’re already familiar with and like. For instance, head for your favorite list-making app on your phone to record who you’re buying for. Or grab a fun notepad and a colorful pen and write it out by hand. In addition, you might even consider tables and pie charts as candidates to help in your budgeting process.
METHOD 1: THE DOLLAR FIGURE APPROACH
Let’s break this down into two approaches. First, we’ll address what we call the dollar figure approach. Then it’s on to approach number two: the gift idea approach.
This first approach might be the one to go with if you’re low on funds, or if you simply know at the outset the amount of money you have available to spend. Use this method to tailor your gift decisions to the amount of money you have. In other words, money matters are prioritized first, what you decide to purchase is second.
WHERE TO START
Get started by isolating the dollar figure you have available for spending. There’s more than one way you could arrive at this number.
One scenario: you can save all year long and set aside the money. We’ll call this the “fund method.” In this case, you can skim money off every paycheck and place it in a separate envelope. Alternatively, you can keep it in a bank account and simply maintain a running tally on paper (or your phone) of how much you’ve accumulated and earmarked for your fund. Obviously, how much you’ve saved up in your fund will determine how much you have to spend.
A SECOND WAY TO CALCULATE HOW MUCH YOU HAVE TO SPEND
On the other hand, you could use what we’ll call the “percentage method”. To do this, calculate a percentage of your overall take-home pay for the year. The percentage you choose could depend on what you think is a reasonable amount of your income to spend. To begin with, calculate how much money you take home in a year.
Let’s say you make $30,000 annually. Further, let’s say you personally think it’s reasonable to spend about 2% of that income on the holidays. Next step – a simple mathematical calculation. Multiply your percentage (in this case 0.02) by your take-home pay (which is $30,000). Type that into a handy calculator and you’ll find that 0.02 x $30,000 = $600.
What does this all mean? Well, it means you’ve concluded that $600 is a reasonable amount of money for you to spend on the holidays. So, now you have a helpful element of your Christmas budget: your dollar figure.
Note: If you prefer, you could also specify a dollar range as opposed to a single dollar figure.
STRATEGIES FOR WHEN YOUR FUND IS SMALL
Okay, let’s say you’ve calculated your number, and you’ve found it’s on the small side. If this sounds like you, don’t worry! Here are some things you could do if you find yourself operating on a shoestring budget.
Buy throughout the year.
Browse when you see a sale, keeping your eye out for things that would make great gifts.
Keep a running list through the year of gift ideas for various people. If you see the item or something comparable, snag it while it’s on sale.
Go for handmade gift items.
Provide services as a gift (an evening of babysitting, a movie night, pet sitting, a week off from household chores, etc.).
Give group gifts. Instead of buying separately for a husband and wife, buy a sharable gift. Or, purchase something that the whole family will enjoy instead of selecting individual gifts for parents and each child.
Have a gift exchange in which everyone buys for one other person. This way, everyone isn’t buying for everyone.
METHOD 2: THE GIFT IDEA APPROACH
Okay, now let’s take a peek at our second approach: the gift idea approach. This could be the method for those who already have a good idea what things they’ll be purchasing. Here let’s say you’re fairly clear what you want to get for many recipients on your list. Additionally, you already have an idea what other purchases you’ll be making during the holidays.
WHERE TO START
To begin, make a list of all sources of expenses. Note that you don’t have to add any dollar figures just yet. Instead, simply list any items you plan to purchase or anything else related to the holidays that will cost you money. Here are some things that could make it onto your list:
Gifts you plan to buy
Names of people you need to get a gift for (if you haven’t come up with a concrete gift idea yet)
Food expenses
Travel expenses
Entertaining expenses
Entertainment expenses
ROUGH IN THE NUMBERS
Now that you’ve listed what things will incur expenses, it’s time to move on to approximating cost. At this point, create a second column next to your itemized list of expenses. Here, you can choose to insert either a single dollar figure or a dollar range as you estimate how much each item will cost. To do this, use your best guess based on previous purchases you’ve made or past times browsing in stores or online. In short, give it an educated guess.
RESEARCH TO FILL OUT YOUR FRAMEWORK
Now, you have a rough estimate of what your Christmas budget will look like. However, let’s take it to the next level. Thus, get started looking up list items whose price you weren’t sure of. Also, even if you’re fairly confident of an item’s likely price, consider verifying anyway.
Obviously, you could check price tags in the store. But you might find it easier to get a ballpark idea by searching online even if you plan to do your shopping in-store later. Still, if you do intend to buy items online, remember to factor in shipping costs.
WHAT TO DO WHEN YOU DON’T KNOW WHAT YOU’RE BUYING
Now, let’s say you’re confronting a dearth of ideas. You simply don’t know what you’ll be buying this year. If you find yourself in that situation, here are some potential responses.
You could create an “average gift price” based on what you do plan to purchase. For instance, if you’ve selected gifts for 3 people, calculate the average price of the gifts. Then, extrapolate that information to help you determine how much you could reasonably spend on the rest of your recipients. If you’ve bought a couple of gifts, and you find you’re averaging $20 per recipient, assume that you can buy the rest of your gifts for an average of $20 per person.
Yet, be sure to leave any “outliers” out of your calculation here. These would be gifts that are a lot more or less expensive than the rest. For example, that expensive laptop for your son or the 50-cent candy bar you grabbed as an “extra” for a sibling could be outliers. You may opt to leave them out when you calculate your average. To put it another way, leave out those big-ticket items that you won’t be buying for everyone – they’re the exception, not the rule.
KEEPING YOUR CHRISTMAS BUDGET ONCE YOU MAKE IT
Of course, coming up with a number is only one part of the equation here. Once you have a number, you also want to stick to it. You want to stay at or under the number or within the number range you established for yourself. Let’s run through some things that may help you do that.
HOW TO KEEP YOURSELF FROM OVERDOING IT
First off, avoid tempting places. This could look different for different people. However, one example is if you know you’ll likely spend over your budget in a certain store, consider staying out of that store. For example, let’s say you’re trying to buy gifts at discount prices. Thus, you may choose to bar yourself from shopping in high-end stores in the mall.
Or, let’s say you find yourself likely to buy on an impulse when shopping in person. In that case, you could choose to do your shopping online instead of in-store to keep the temptation at bay. In short, to keep yourself going in the right direction budget-wise, avoid places where you’ll be tempted to buy more than planned.
CREATE ACCOUNTABILITY
Next, create accountability in your shopping. You could begin by discussing your budget and shopping plans with a family member. Then, take another step by shopping with someone. Bring along a family member or friend who will help you stick to your budget. Alternatively, if no one can shop with you, ask someone close to you to check in periodically on how you and your budget are getting along.
MONITOR YOUR ACTIVITIES
Additionally, keep track yourself of how you and your budget are doing. To begin with, track your purchases by writing them down in a central location. Note the item purchased and how much it cost. Every time you add a new item to your list, add them all up to figure out how much you’ve spent to date. Then you can compare that number with the total you’ve allowed yourself to spend. There are plenty of apps available that can help you do this.
This way, you can see how your spending stacks up against your budget. And you can calculate how much you have left to spend. When you’re about to purchase an item, make sure you have a general idea of how much of your “fund” or allotment you’ve already used up and how much you have left to go. Try to understand how each gift stacks up when it comes to your budget.
BUDGETING TODAY FOR A BETTER TOMORROW
Use your Christmas budget to take some of the guesswork out of your post-holiday financial situation. Use it to keep on track while making the purchases you need for the holidays. It can help you stay inside your personal financial comfort zone, and your piggy bank will thank you for it. Don’t forget to save some time (and maybe money) to plan for a New Year’s celebration.
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