How to Make a Holiday Budget—and Stick to it (2024)

Ah, the holidays: the time for family gatherings, hot cocoa and possibly crippling credit card debt.

For many people, keeping costs under control this time of year can be a challenge. In fact, over half of Americans say they expect to feel financially burdened by this year’s holiday shopping season, according to a survey from Bankrate. Another 53% say they’ll use a credit card for at least some of their holiday purchases—and with average credit card interest rates above 21%, that could be costly.

There’s also inflation, which sits just under 4%, to worry about.

“It’s extremely important to have a budget—and stick to it—this holiday season,” says Brandon Robinson, founder of JBR Associates, a financial services firm in Plano, Texas. “With inflation, your dollars aren’t going to go as far as you think.”

To help you avoid overspending this holiday season, here’s how to make your budget—and follow it.

1. Set your limits

First things first: Decide on your holiday bottom line. This will give you a clearer picture of the kind of trade-offs you’ll need to make to fit end-of-year spending into your overall budget.

Every person’s situation is different, but budgeting experts say 1% of your annual income has traditionally been a guideline. “If people want to use that number, that’s fine,” says James Guarino, a certified financial planner at Woburn, Mass., financial advisory firm Baker Newman Noyes. “But it really depends on your own individual circ*mstances; it’s such a personal decision.”

Once you’ve settled on an amount, break it down by recipient. Don’t forget to account for tips to service workers as well as any gift exchanges or holiday parties where you’re expected to bring a present. (Guarino refers to these as “stealth costs.”)

You should also set budgets for nongift expenses you expect—such as travel costs or even your holiday dinners. “Everyone buys food for big holiday meals,” Robinson says. “The cost of food normally goes up more than the average inflation rate.”

Once you’ve determined your spending limits, make sure you write down the dollar amounts, and keep the list on hand as you shop. It’s one of the best ways to hold yourself accountable and avoid overspending.

2. Put money aside

Ideally, you should begin saving up at least a few months before the holidays so the expenses don’t hit all at once. Newport Beach, Calif.-based certified financial planner Mark Rylance advises setting up automatic monthly transfers from your spending account to another account that you won’t touch. “That’s budgeting 101,” he says. You can also open a high-yield savings account to earn more through interest. (Some accounts are offering 5% APYs or higher these days).

If you are reading this in December, there are still budgeting strategies you can use. In this case, experts say start by figuring out how much of your gift budget can be offset by cutting out discretionary expenses during the month, such as meals out or impulse buys.

And once the holiday season is over, you can do yourself a favor by starting to save for next year. While that might seem a bit excessive, the earlier you start, the less you’ll have to sock away each month. “Spending $1,500 on gifts can feel like a lot,” Rylance says. “But if you’re contributing a little more than a hundred bucks per month all year long, you won’t feel it as much.”

3. Decide how you’ll pay

If you anticipate struggling to stick to your budget, try to use cash whenever possible. “It gets really dicey when we’re using that plastic card, spending that magic money,” Guarino says. “If you’re using your credit card, the sky’s the limit, and that can be deadly.” Plus, discounts for paying in cash are becoming more common.

If you do use your credit card, make sure you have the funds to pay it off later that month. It can help to stick with a simple credit card—and to remember that credit card companies can raise interest rates so long as they give you 45 days’ notice.

“Most consumers don’t know that interest rates are variable, and right now they’re skyrocketing,” says Marisa Rothstein, a Kinderhook, N.Y.-based certified financial planner. “So as bad as maintaining a credit card balance has been in the past, it’s becoming more and more dangerous.”

4. Start buying as soon as possible

According to Bankrate’s survey, half of Americans plan to holiday-shop before Halloween even hits—a smart move that can reduce stress and save you dollars and cents. “If you’re buying in December, you’re missing out on potential sales at other times of the year,” Rylance says. “But if you’re organized and ready to shop early, then you can pick something up when you stumble across a random discount at Costco.”

Getting a head start on your gift buying also gives you opportunities to buy items that are out of season, and it can help you avoid extra fees for expedited shipping. Shipping costs, in general, have soared the past few years because of supply chain issues and inflation, Guarino points out. Doing your shopping with plenty of time to spare will help ensure you don’t pay even more.

5. Look out for deals and promos

We’d be remiss if we didn’t call out the power of deal-watching. From Black Friday to Cyber Monday, there are tons of opportunities for snagging a good price on wishlist items. You can also watch for store-specific deals if there is a place you know you always buy from.

“Subscribe to email newsletters for the retailers you love,” says Matt Gromada, head of family banking at Chase. “Many companies appreciate the loyalty and will give you early access to sales, first looks at new products and even special discounts.”

Depending on what companies you bank or have credit cards with, you also may have access to special deals there, too.

6. Buy creative or sentimental gifts when possible

A good gift doesn’t have to cost a lot of money. “Go in for a group gift with friends or family to split the cost of an item,” Gromada says. “Or get creative, and give something homemade—an art, craft, print of a photo you’ve taken or even a homemade coupon booklet.”

Gifting experiences—such as pedicures or a movie date—is another option, or you could spend a day volunteering with someone or donating to a cause that’s important to them.

Lastly, don’t hesitate to consider vintage, consignment and even thrift stores to stay within your budget, particularly for gift recipients who you know are concerned with their environmental footprint. According to Rothstein, Goodwill and Salvation Army locations are now more likely to have lightly used items such as furniture. “There’s been a big improvement in the quality of what you can find there,” she says. “As people have moved so much in the last couple of years, they’re leaving all this furniture behind, and a lot of it is practically brand new.”

7. Don’t stress

There is a lot of pressure to spend during the holiday season, but try to avoid getting caught up in what other people are doing with their dollars. More important, remind yourself that your loved ones wouldn’t want to find out you put yourself in a difficult financial situation for their sake.

“You don’t want to give until it hurts,” says Akeiva M. Ellis, a certified financial planner in Framingham, Mass. “If you cannot maintain your lifestyle or pay your bills, you’ve given too much.”

—Additional reporting by Aly J. Yale

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