How to Create a Holiday Budget That Works for You

How to Create a Holiday Budget That Works for You

As you make big holiday plans, keep in mind that with some smart planning that includes creating a holiday budget, you can enjoy the festivities without breaking the bank.

In fact, many Americans say they plan to tighten their belts when it comes to holiday spending this year. More than half (56%) of those who responded to NerdWallet’s 2023 Holiday Shopping Report survey said they won’t be buying as many gifts this year, and 26% have discussed, or plan to discuss, scaling back holiday spending with their friends and family members. 

Lower holiday spending appears to be part of a wider 2023 trend: 92% of respondents to a CNBC poll fielded in September said they had reduced their spending over the previous six months due to inflation. Many said they would continue to do so through the holidays. So, if you find yourself looking for ways to cut corners this holiday season, you’re not alone! Holiday observers nationwide are adjusting their budgets and their expectations.

What goes into your holiday budget?

Just like your regular monthly budget, your holiday budget should be structured as a working tool you can monitor and adjust as you go. Decide whether you’d prefer to use a simple spreadsheet or a budgeting app, and then commit to engaging with your budget every time you make a holiday purchase.

Now think about all of the things you may spend money on during the holidays. If you’ve kept good records, look back to see what you spent money on last year. This gives you an opportunity to reflect as well: Did you need to spend as much as you did?

Here’s a list of common expense categories to get you started:

• Travel to visit family and friends
• Hosting or attending get-togethers (food, beverages, host gifts, etc.)
• Holiday gifts and their related costs (gas, food and parking if you shop in-store, for example, and shipping costs if you buy gifts online or send packages to out-of-towners)
• Family photos
• Concerts, movies or other events
• Holiday clothing
• Charitable donations
• Greeting cards and postage

Next, assign a realistic dollar amount to each activity or item, and tally the numbers to arrive at your ideal holiday budget. How does that square with the discretionary funds itemized in your regular monthly budget?

If your discretionary funds will cover all of your planned expenses, then you’re all set! If not, you’ll need to do some adjusting to your holiday budget, your monthly budget or both. You can eliminate certain purchases outright or move funding from one category to another.

These ideas may help:

• Cut back on holiday travel expenses. Airfares are typically sky-high during the holidays. Your loved ones will understand if you choose to reschedule for a time of year when flights are cheaper, or maybe you can save by driving instead.
• Talk with your family members and friends about setting dollar limits on gifts. Suggest ideas for making the holidays just as fun — a gift exchange rather than individual gifts to all, for example — and ask them for their ideas. Having a shared set of expectations relieves the pressure you and those close to you might otherwise feel about cutting back.
• Be more selective about the activities you engage in. Choose to attend a holiday concert or a movie, perhaps, rather than both.
• Give your closet a fresh look. Think carefully before investing in new clothes and accessories for holiday functions. Check to see if you have some great options you may have forgotten about. If not, you may want to check out some fashion rental platforms to see if you could save by borrowing versus buying special-occasion clothes.
• Go electronic with greeting cards. While some people enjoy the tradition of handwriting and mailing cards, many are evolving toward email and text messages. Electronic greetings can save you money and time — two things we can all use a little more of this time of year.
• Scrutinize your monthly budget. Determine where you can free up a few extra dollars. Maybe you’re open to making more meals at home to save on dining out, eliminating your morning coffee run, carpooling rather than driving solo or delaying some of your “wants” until after the holidays have been paid for. This is also a great time to give your subscriptions and memberships a good look. Are you using all of your streaming services? Your gym membership? Where else can you trim some fat from your monthly budget?

How to stick to your budget

With your holiday budget in place, you can see your spending limits. Now you just need to exercise discipline to stay within them. The key is to track your spending closely.

Here are some options for tracking your holiday spending:

• Use digital banking tools to monitor your spending as you go.
• Hold onto your receipts and deduct each amount from your budget, noting the resulting available balance.
• Use a budgeting app that tracks your spending automatically.

If you find that you have overspent in one area, reexamine your budget to see where you can adjust to make up for that. Remember that your budget is a working tool: You can move funds from one category to another to make sure everything evens out in the end. Imagine beginning a new year with no holiday debt!

Armed with a sound strategy, a holiday budget and the commitment to stick with it, you can make that New Year’s resolution a reality.

This article is for general information purposes only and is not intended to provide legal, tax, accounting or financial advice. Any reliance on the information herein is solely and exclusively at your own risk and you are urged to do your own independent research. To the extent information herein references an outside resource or Internet site, Dollar Bank is not responsible for information, products or services obtained from outside sources and Dollar Bank will not be liable for any damages that may result from your access to outside resources. As always, please consult your own counsel, accountant or other advisor regarding your specific situation.