How to Plan For a Debt-Free Christmas

Do you feel pressure to pull out your credit card every year for Christmas or that you always overspend? If so, I want to share some tools you can use to plan for a Christmas you don’t have to go into debt for. 

Decide What You Would Like/Need to Spend Money on This Christmas

  • Take out your calendar and look at what is actually happening between November and December that will cost you money outside of gifts. 
  • Calendar questions to ask yourself.
    • Am I traveling somewhere to be with family or friends? How much will this cost?
    • What Christmas parties am I going to? This includes work parties, friend’s get-togethers, or family gatherings. Will I be bringing dishes, buying host gifts, etc.?
    • Am I hosting any Christmas parties? What do I expect this will cost for food, decor, and drinks?
    • Are you hosting family at your home? Will you be taking them around town, spending more on groceries, taking them to see the sights in your area? Will there be money spent on admission, gas, more on eating out?
    • Am I sending out Christmas cards? What month will I do this, and what is the expected cost?
    • Am I participating in any gift exchanges at work, with friends, or with family?
    • What entertainment am I planning to attend? Am I taking the kids to a Christmas show, light show, or community event that has admission prices? 
  • Who would I like to give gifts to?
    • Next, make a list of every person you would like to buy a gift for this year. This includes your family, friends, and even the coworker you want to give a card and chocolates to. Leave no person you want to give something to off this list, no matter how small.

Don’t Make This Holiday Budget Mistake 

This might seem simple but do not start assigning amounts you think you SHOULD be spending on gifts, parties, etc. Instead, decide the total amount you CAN spend first. Try not to let the presents you would like to give decide the budget. This is often why pulling out your credit card can seem like the only option. 

The key to having a debt-free and stress-free Christmas is determining the bottom line number you can afford to spend and then assign how much you’ll spend per person and event based on that number. This is why making your budget before you start Christmas shopping is so important.  

Debt Free Funding Options

How much you decide to spend depends on your income, expenses and how much you have saved for Christmas already this year. 

Plan A: Using Your Sinking Fund/ Christmas Savings

  • Christmas is not an emergency. Every year, we know it’s coming so plan A is to start saving for Christmas all year with a sinking fund. This is how my family saves for Christmas. We have a separate savings account at our bank that we add money to every month so that Christmas is not a large expense. This is the easiest way to fund Christmas.

Plan B: Use Money You Can Find in Your November & December Budget

  •  If you haven’t been saving all year, it’s not the end of the world. You can still enjoy Christmas without going into debt. For the months of November and December, make your monthly budget only for your essential expenses. This includes the things necessary for you to live like housing, food, transport, utilities, bills, etc. Then when looking at your lifestyle expenses like eating out, fashion, beauty, extra debt payments, etc., ask yourself what you can pull from those amounts. There is sure to be a couple of hundred dollars hidden in the lifestyle expenses that you can allocate toward your Christmas budget. Then next year, you can make a Holiday sinking fund to de-stress Christmas a bit. 

Make Your Holiday Budget 

Once you have found a number that is realistic and comfortable for your family, start making decisions about how much you would like to spend in the different categories you made in the previous section (travel, hosting, gifts, food, entertainment, etc).

Write down how much you want to spend in each category in a separate budget than your monthly budget. Either online or on paper.

Now is a good time to decide how much you’d like to spend on the each person on your list. Remember, this part of the budget is where you get to decide where you want this money to go, and what you value most for the holidays. Try to not let other people’s expectations about what’s important dictate how you spend your money. 

Once, you have written out and allocated this money, you have your Christmas budget! 

Tips if Your Numbers Are Tight*

Creativity is your best friend. Not every coworker needs a gift. Maybe this year every family member won’t get their own gift; you can do family gifts or gifts just for kids. You can buy second-hand things or do a little more baking. There are loads of ways to show people you care without dropping a lot of money.

Last Step: Track Your Holiday Spending 

It’s important to keep a log of what you spend on Christmas after you set your budget so you can adjust amounts as necessary and make sure you don’t overspend. 

You can use the cash system to do this or just make a spending log on paper or on your phone. It’s a good idea to keep all of your holiday receipts in a bag or envelope to add up as you spend. 

The good news is that if you find out the amount you can afford to spend this Christmas and then allocate it properly to the areas you want to, you can ensure that this Christmas won’t put you into debt.

What other ways do you keep your Christmas spending under control?

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