We’ve been guilty of using credit cards to finance our Christmas purchases in the past because we didn’t save for Christmas. It never really felt great; the presents didn’t really feel like they were ours yet—because they weren’t.
We’re not alone. Millions of people pay for Christmas with credit cards every year, adding another $986 on average to their debt loads.
It doesn’t have to be that way, though.
Last year, we started a simple strategy to save for Christmas. We’re fully prepared to tackle gift-buying head-on now. No more Christmas debt for us!
Here’s how we did it, and how you can too:
Step One: Make A List (And Check It Twice)
If you’re the type of person who likes to hand out present to anyone and everyone like Oprah hands out cars, this will be a lifesaver for you.
Come up with a core list of people you’d like to give gifts to, and stick to it. Resist the urge to buy other presents when you’re out shopping because so-and-so would just love this! It’s not your responsibility to buy shit for everyone you’re acquainted with.
For us, we really just wanted to give gifts to each other and our parents and siblings. Easy peasy; our Christmas shopping has already gotten way easier.
Step Two: Decide On A Christmas Budget
By thinking about your spending limits before you go shopping, you’ll be less likely to be tempted by spur-of-the-moment purchases.
Try to challenge yourself by setting a very low Christmas budget. Don’t fall into the trap of thinking that spending less money on someone means you have to give them a crappy gift; it just forces you to be more thoughtful.
Related post: 20 Frugal Christmas Gift Ideas
I don’t know about you, but I’d rather get a cheap gift that someone genuinely put some thought into rather than an expensive but unsatisfying present. I can’t tell you how many times I’ve gotten expensive sheets, towels, and clothes from friends and family that I’ve never used.
Related: Budgeting For Budget Haters ecourse (affiliate link)
We decided on a total limit of $400. We each get $150 to spend on the other person, and the remaining $100 will be split up between our parents and siblings.
Optional Step Three: Track Your Christmas Spending
What if you honestly have no idea how much to allocate to your Christmas budget? Fear not! If you’ve already started your Christmas shopping or you’re about to, now’s a prime opportunity to get some concrete data that’ll help you develop a winning savings strategy.
Keep your receipts or check your bank/credit card statements as you purchase your Christmas presents. Tally them all up to see what you actually spent on Christmas this year.
It’s all fine and dandy to come up with projections on what you should spend, but sometimes what works in your head and what reality is are two different things (Boy, that’s the theme of my life….).
If you’re a chronic Christmas overspender, putting some numbers on your situation can show you exactly how much you’re spending. Are you comfortable spending this amount on gifts?
Think long and hard—what would happen if you were to spend just a portion of that amount on reaching your own financial goals sooner? Are you willing to make that sacrifice?
Step Four: A Strategic Plan To Save For Christmas
By now, you’ve either got an estimate of how much you want to spend (from step two) and/or you’ve got some real numbers to work with (step three).
Now, divide that number by 11. This will be your monthly contribution for the next 11 months. Either earmark it in your budget, or you can even set up automatic withdrawals from your checking account into a dedicated savings account through your bank.
Bonus points: name your savings account Christmas Fund to make it more fun!
By the time November rolls around and you’re ready to start Christmas shopping on Black Friday, violà! You’ll have a fully-stocked Christmas fund set and just waiting to be spent. No more credit card debt!
We’ve been setting aside $36.36 per month, starting in January. Honestly, we’ve barely even noticed that we’re saving that much because it’s such a small amount. But, now that it’s November, we’ve already got $400 saved up and it’s time to go buy Zach some nice new undies!
You know you’re an adult when you get excited about getting underwear for Christmas…
As long as we keep using this method, we’ll have debt-free Christmases forever! If that doesn’t make for happy holidays, I don’t know what does.
Do you save for Christmas? Leave a comment below!
I guess I’ve always gotten windfalls in late November or December that took care of my Christmas budget. When i was a kid, it was my birthday money (Nov 29). When I was working in my 20s and 30s, we got store-based commissions, and always got a nice one on the Dec 16 paycheck. Now, I time the distribution from my inherited IRA for late November. So since I’ve always known that extra would come in, I’ve never had to be that disciplined about putting money away each month.
But I do save up rewards to use as well, from Swagbucks, Ibotta, and our credit cards. That’s over $400 “off balance-sheet”, as Jon likes to call it.
Sounds like you’ve got a great system down for making sure you have enough money. I’m planning on a blog post next week too re: cheap and easy ways to pay for Christmas and Swagbucks/Ebates/etc.. are one of my top tips – thanks for the reminder!
Personally, I think step 3 (tracking your Christmas spending) shouldn’t be optional but instead should be encouraged! Really enjoyed your article! Thanks for your Christmas shopping tips!
Actually, that’s very true! Even if you already know how much you want to spend, you should still track it so you make sure you stay under – good point! 🙂
Christmas budget is key! We’ve been doing this for a few years now and it’s really been a big win as far as keeping our holiday spending in check.
That’s great! I don’t know what I would do without a holiday budget. I’d probably be in another $83k of debt.
Haha a little extreme but yes it definitely helps limit spending!
Sometimes people need extreme measures (don’t even ask how much I used to spend on restaurants each month… lol!)