Creating a holiday budget is a lot like creating your monthly budget. First, you figure out how much money you have to spend. Second, you list your holiday expenses. Then, you divide the money you have among your holiday expenses. If you don’t have enough money to cover your holiday expenses, you adjust that list so you don’t overspend.
Here’s a closer look at this process to help you create a holiday budget that won’t break the bank or bust your financial goals.
5 Steps to Creating a Holiday Budget
Review your monthly budget.
Before you create a holiday budget, it’s a good idea to review your monthly budget. Your monthly budget shows how much money you bring in, how much money goes out, and how much money is left to put towards other things – like holiday spending.
Decide on your spending limit.
Now that you know how much money you have after your expenses are covered, it’s time to decide how much of that you want to spend on the holidays.
We recommend deciding on an amount you have in cash. This could include money set aside for the holidays or that you don’t need to pay your monthly expenses. The reason? Putting your holiday expenses on a credit card can add up to much more over time. For example, a $500 charge to a credit card could end up costing $800 or more if paid back at the minimum payment.
List your holiday expenses.
Once you know how much money you have to spend, make a list of your holiday expenses. Think of everything you plan to spend money on this holiday season. This list should include gifts, decorations, travel, food (outside of your monthly food budget), activities, donations, and everything in between.
Allocate money to each expense.
Don’t panic if your holiday expense list is long. In this step, prioritize your expenses and allocate the money you have towards each one. If your expenses outweigh your holiday money, adjust your holiday expenses based on priority. This step may take a little bit of time to make the numbers work, but it’s worth it.
Track your spending.
Now that you have your budget, it’s time to stick to it! Keep your receipts and track your spending as you shop. This way you can be sure you can adjust as you go and make sure you don’t overspend.
The holiday season shouldn’t break the bank. Creating a holiday budget is easy and an important step towards keeping you on the path towards reaching your financial goals.