How to Make a Christmas Budget [that’s easy to stick to]

This simple guide will help you create a Christmas budget to help you keep track of your Christmas spending and enjoy the most wonderful time of the year!

A pink piggy bank wearing a red Santa hat sits on a table with Christmas decorations lying around it

Christmas is one of the most highly anticipated holidays of the year, and you’d probably love to celebrate with a fabulously festive Christmas this year. But Christmas is an expensive time, and it’s important not to overspend over the holiday season, however strong the urge to splurge.

Budget planning might not seem like the most festive subject to talk about, but neither is credit card debt. There’s nothing festive about the financial stress of opening massive credit card bills in January, either. Without a realistic budget and a plan, it’s all too easy to lose track of your purchases. Before you know it, you’ve spent too much, and you’ve got no idea where all the money has gone.

Ideally, you’ll plan a Christmas budget from the start of the year and put aside money as you go. But we don’t live in an ideal world, and there’s a good chance you don’t have Christmas savings to fall back on. So, let’s get the budget planning stage out of the way as early as possible, and then you can get on with all the fun parts of planning the Christmas holiday season. 

This guide will take you through the steps to create a Christmas budget you’ll find it easy to stick to.

The Key Takeaways

  • Your Christmas budget will help you avoid overspending and set priorities for your purchases.
  • It’s essential to include every item you might need to buy during the holiday season.
  • Always shop around for the best price, but don’t underestimate costs in your budget.
  • If your Christmas expenses outweigh your budget, try to make cuts or find extra earning opportunities.
Pink piggy bank wearing a red and white Santa hat. It is standing on on a snowflake covered surface

Why is a Christmas budget important?

There are so many things to spend your money on over the Christmas season: Christmas presents, parties, food and drink, supporting charities…

But unless you won the lottery this year, chances are that you can’t afford to do it all. So you will need to make some decisions about which holiday spending takes priority. 

Your budget for Christmas is an essential tool that will help you plan exactly where you will spend your money over the festive season. It will help you keep track of your purchases and avoid overspending. It will also ensure you don’t miss anything out when things get hectic.

Budgeting for Christmas separately will also stop you from spending money that should be sidelined for essential outgoings. This is particularly important if you’re on a tight budget.

A pink china piggy bank wearing a red scarf and Santa hat. There are Christmas presents around it, and text reading 'Click here for Christmas Money Saving Tips'

How will you pay for Christmas?

Your first task is to work out how much you can afford to spend on Christmas and how you are going to pay for it. 

If you’re planning a budget at the start of the year, which is a good time to start planning your Christmas budget, you can work the other way around. Start by working out a realistic budget for your holiday spending you need and then decide how to save that much. 

But if you’re starting your festive financial planning later on in the year, you really need to ‘cut your cloth’ according to your finances.

So, take a little while to work out your financial position. If you have been able to put money aside to save for Christmas, that is your starting point. Then, you can decide how much of your monthly income you can afford to add to this and if there are any places you can cut back to increase the size of your Christmas budget.

Your final option is to borrow money to pay for Christmas, but if you decide to do this, look carefully at the cost implications. It’s better to reduce the size of your Christmas celebrations than to take on debt you can’t afford.

A hand in a winter sweater holds pen and writes Christmas plans in a spiral notebook. There is a red star and a green mug of tea and lemon near by

Creating a Christmas budget

Once you’ve decided how much money you can afford to spend on Christmas, you are ready to create a Christmas budget. This doesn’t need to be a complicated process, and you can prepare your budget in a notebook or on a spreadsheet, whichever suits you best.

Your first step is to list everything you need to spend on at Christmas. This should only include Christmas expenses, not costs that are part of your regular monthly budget. 

You can split your expenditure into categories such as:

  • Gifts and cards
  • Food and drink
  • Decorations
  • Everything else
A pair of hands wrapping a gift box, surrounded by gift boxes, packing tape, rope, paper rolls and decorations

Gifts and cards

One of the first things to tackle is your gift list and Christmas cards. It’s easy to blow your holiday budget in the hunt for the perfect gift, but there are ways to keep your gift-giving list under control.

Make a list of all the people that you’d like to buy a gift for this year. If you need to economise this Christmas, this will be one of the key places to make some cuts. Do you really need to buy expensive gifts for everyone, or can you reduce the number of gifts you need to buy?

Maybe you could give them a voucher to spend some quality time with them or exchange handmade gifts as a new annual tradition.

There may be some people you can agree not to swap gifts with, or others that will be happy to join in with a Secret Santa. This is a great option for groups of friends, work colleagues or family members and really helps to keep your holiday shopping down.

Other people might agree to a spending limit for gifts, which is a good idea if you all want to keep your Christmas present budget down.

A woman's hand is shown posting a pile of Christmas cards into a bright red post box

Once you’ve nailed down your Christmas gift plans, you can do the same for Christmas cards. Decide who you need to buy (or make) a thoughtful card for, who will get a card from a selection box and who will get a cheery ‘Merry Christmas’ next time you see them.

You’ll also need to include things like gift wrapping paper, gift bags, tags and ribbons. And don’t forget the sticky tape!

Overhead view of Traditional Christmas fruit mince pies decorated with pastry stars ready to be sprinkled with powdered icing sugar

Food and drink

The next area to plan is your food and drink budget. Obviously, you need to include everything you’ll serve on Christmas day or your share of the bill if you’re opting to eat Christmas dinner in a restaurant or split the cost with another family. 

But you need to include more than that if your Christmas budgeting is going to be accurate. Make sure to include everything from Christmas Day breakfast and Boxing Day buffet to the fizz for toasting the New Year.

If you’re planning to support a local charity with a Reverse Advent Calendar this year, remember to add these food items into your Christmas budget.

And don’t miss out all of those little bits you’ll need in between as well. Those biscuits and snacks to nibble on all need to be budgeted for!

White Christmas decorations on a shelf against a dark wood background

Decorations

Hopefully, you picked up some bargains in the post-Christmas sales last year. But your Christmas budgeting might need to cover replacing decorations or buying new baubles or new Christmas lights for the tree. 

If you’re planning to decorate an area of your house for the first time or want to make some Christmas decorations yourself, don’t forget to add these costs to your budget. And, of course, if you prefer a natural Christmas tree, that also needs to go in the budget.

Everything else

The final section of your Xmas budget covers everything from Advent calendars to Christmas pyjamas.

If you’re planning to visit a Christmas market or travelling home for Christmas, don’t forget to include your Christmas travel expenses. And don’t forget the little details – a night out at a Christmas pantomime will mean buying tickets, but you’ll alsoprobably want to buy drinks and ice cream. 

Basically, anything else related to Christmas goes in this section. This is really important because it’s very easy to keep buying little treats throughout the festive season ‘because it’s Christmas’. All those little costs can quickly mount up.

Happy young woman writing a list of Christmas purchases in a notebook, bags of Christmas shopping are nearby

Add a cost against everything

Once you have written down all of the items under each section, check to ensure that you’ve covered everything. For instance, have you included stamps for posting your Christmas cards or boxes for the cookies you plan to bake as Christmas gifts?

When you have every detail listed, go back through once more and add costs against each item. You might be able to look back at the previous year’s costs, or you may have to do some research. Use estimates if you have to, but make sure that your prices are realistic.

Ideally, you’ll be able to find the best deals on everything you need, but you’re only kidding yourself if you underestimate the cost of Christmas.

Now you’re ready to look at the total and see how it matches against the amount that you decided you could spend on Christmas. If your projected Christmas expenses are lower than your total budget, then you can go right ahead and start planning a fabulous festive season.

A brunette woman lying on the couch and writing her Christmas list at home in the living room

What if your total cost is higher than your budget?

If you add up your total amount and find that your holiday expenses look higher than your budget, it’s time to start trimming.

Take a moment to really examine your costings. You’ll need to make some cutbacks, so prioritise your costs and work out what is really important for a great Christmas. 

Mark each item on your list so that it falls into one of three categories.

  • Things you can’t bear to cut out
  • Things you can live without
  • Things you’re not sure about

Add up the cost of the things that you can’t live without. Does that fall within your budget? If it does, that’s great – you can start introducing some items from the other categories if you have enough money to cover them.

If your budget won’t cover everything you really want to buy, you have some trimming to do.

A middle-aged woman sitting at a table, looking at a laptop and making notes in a notepad

How to trim your Christmas budget

For instance, you are sure to want to buy Christmas gifts for your close family members, but what about neighbours or work colleagues. Could they be trimmed from the list, or can you reduce the amount you’re planning to spend?

Can you reduce your budget on Christmas food, and do you really need to buy those Christmas pyjamas for the whole family?

Shopping for presents in the Black Friday and Cyber Monday sales is a great way to stretch your holiday budget, but be sure not to spend too much when you’re online shopping…

There are ways that you can boost your finances to make paying for Christmas easier. Perhaps you could take on some season work or a side hustle to earn some extra cash? You may have some gift cards tucked away, or you could earn some extra money by selling unwanted items online.

You’ll find many more practical tips for boosting your Christmas budget here, along with some budget gift ideas.

Planning a Christmas budget is never going to be a fun job. But the good news is that setting your festive financial goals now will simplify your Christmas shopping choices and reduce the financial strain of overspending on Christmas next year. And that’s the best way to enjoy a truly Merry Christmas!

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