How to Create a Pain-free Holiday Budget

No matter what beliefs you hold, the chances are good that October, November, and December will be pricey months. And if you’re all in on Christmas in particular, the holidays can be the most expensive time of the year.

While the idea of creating a strict budget probably doesn’t give you the holly jollies, it’s important that you think strategically about your spending during the holidays. Nearly a quarter of Americans expect to go into debt this season, thanks to holiday spending. Given that federal student loan deferments and many mortgage forbearance programs will expire in early 2022, it’s not a great time to add debt if you don’t have to.

Fortunately, holiday budgeting doesn’t have to be a chore and it doesn’t have to make the season any less merry. A simple, pain-free budget can help keep your spending low and your spirits high. Here’s what it takes.

Set your priorities

What makes a happy holiday season for you? Good food? Bright decorations? The ability to give lots and lots of presents?

There are plenty of ways to spend your money during the holidays, but not every expense is created equal – especially when it comes to your happiness and fulfillment. By understanding what makes you happy, you can focus your available funds on those areas, and cut back elsewhere.

Set your spending limit

Ideally, you would create a thorough annual budget in January that sets aside a specific amount of cash for your holiday season spending. That may work for some people, but for others it’s just too difficult to plan that far ahead.

What may be more realistic is to look at what you have and what you plan to earn through the end of the year, and base your holiday budget on that. Break down your remaining expenses for the year and subtract them from your coming paychecks (and maybe there’s a year end bonus in there, too). What’s left is what you have to spend on the holidays.

If that’s not enough, you can extend out and “borrow” against January and February’s income. However, this can (and likely will) put you in debt, and if you don’t have a plan to repay this new debt as soon as possible, you may be putting yourself into a bad position to start 2022.

Keep track of your spending

Keeping yourself honest and on-budget starts with tracking your spending. Every expense should be subtracted from your budgeted limit. You can find easy-to-use spreadsheet templates online to help you keep track.

Part of being honest is being thorough. Don’t make the mistake of intentionally overlooking smaller purchases. Little things add up quickly. And once you allow yourself to “ignore” the occasional stocking stuffer or small treat, you may be tempted to let some bigger purchases slide past your budget.

Once your budget hits zero, that’s it. And that’s hard! There will always be temptations along the way – things you want or want to give to someone else. But be strong! A temporary lapse can create serious financial problems down the road.

Focus on the moments

The shocking little secret that the big retailers don’t want you to know is that you don’t actually have to spend an arm and a leg to have a happy holiday season. In fact, most of the best parts of the season are fully free or pretty cheap.

If you’re stressed about money, try to put that energy into planning fun winter adventures or finding the ultimate sugar cookie recipe. Make plans to (safely) visit your loved one or go caroling with your neighbors. Create new traditions. Get the whole family involved.

No one wants to have to think about money during the holidays, but putting in a little thought now will absolutely make your life easier 3-6 months down the road.

Feel like you’re already in a financial hole? Connect with an NFCC-certified credit counselor to see how we can help make your life a little easier. Counseling is free and available 24/7.

Jesse Campbell is the Content Manager at MMI, focused on creating and delivering valuable educational materials that help families through everyday and extraordinary financial challenges.

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