How to Set a Holiday Budget
In this post, I’ll help you come up with a grand total for your holiday budget and work backwards to fill in estimated amounts for each of the individual items that you need to purchase according to what you can afford. Then, you can create a holiday spending spreadsheet to help keep your budget in check and organized.
One common holiday budgeting mistake people make is budgeting for individual amounts for each item instead of coming up with a grand total first. They may stick to the budgeted amount for each item, but incidental costs that they forget to plan for ruin their budget. That’s why it’s more important to pick a total dollar amount you can afford for all holiday expenses and work backwards from there. While each family’s total will be different according to their own financial situation, there are questions you can ask yourself to come up with a reasonable amount:
- How much can you comfortably spend in the next six weeks without going into debt, or going further into debt?
- Do you have any other pressing financial needs that take precedence? For example, will you need to make a major purchase in the next few months?
- Can you pay for holiday expenses using cash only?
- Which holiday items are necessary expenses?
- Which holiday items do you have more flexibility?
- Which holiday expenses can you eliminate completely?
Next, using your grand total, fill in budgeted amounts for necessary expenses (such as gas to put in the car to get to Grandma’s house). Then, with whatever funds are left, fill in budgeted amounts for the items on your list are either flexible. For example, purchasing gifts for the kids is necessary, but the amount can be flexible. Or, take holiday cards. do you REALLY need to send 100 cards this year? Perhaps you can pare down that list to 60 and mail postcards instead. Finally, take a hard look at expenses that can be eliminated altogether if necessary. Do you really need to buy a new wreath for the front door, or can you make do with something you already have? Most importantly, make sure the sum of your individual expenses don’t exceed your grand total.
Assignment: After asking yourself what you can reasonably afford, come up with a total dollar amount for your holiday budget. Next, work backwards to fill in individual amounts for each individual holiday expense.