10 Tips to Build a Holiday Budget That Works

The holiday season is the best time for your heart but the heaviest for your pocket. A certain event might bring uncertain expenses and cause stress for you.

An effective way to avoid anxiety and enjoy the moment is to build a holiday budget that works every time.

Let’s dive in.

1.   Set Your Holiday Season Goals Early

You can utilize a financial tool without planning ahead of time. Personal budgets are effective only when planned early and applied properly.

Your first task to create an effective budget is to set holiday season goals. If you are traveling to another city, it will be a different event altogether than hosting your loved ones.

Take the first step early and decide what type of event you want to organize with your current financial resources.

2.  Decide Where You Want to Spend Money

The easiest way to do that is to make a list of anticipated expenses for the upcoming holiday season.

You can take help from the last year’s event if you had documented the expenses at all. Recall the major expenses and how you spent money to get started.

Then, gradually adjust those expenses for inflation and add new ones as you plan.

3.  Review Your Income Realistically

Personal budgets work best when you know your net monthly income realistically. If you are a salaried person, you’ll know it instantly.

For self-employed and small business owners, you can work out the income plan by estimating your future income for the coming months leading up to the Christmas holidays.

4.  Prioritize Holiday Spending – categories

Once you have set the goals, made a list of major expenses, and know your income, it’s time to allocate that money.

It simply means prioritizing your holiday expenses. An effective way of doing that is to categorize expenses.

·      Travel – local and inter-city

·      Gifts for friends and family members

·      Food and entertainment – Christmas meal, party drinks, and other non-regular food expenses.

·      House decoration and attire expenses

·      Donations, Tips, exchange gifts, gift wrappings, and other non-regular expenses.

5.   Set Up Limits for Each Category

You'll surely love to spend on a Christmas event as much as you have but setting up an upper limit will help you create a realistic budget.

Analyze your monthly income and cash available. Then, think how much credit you can utilize easily if you want to spend more than that.

Then, set up limits for each category listed above and stick to your budget.

6.  Save First, Spend Later

Start saving for the holiday season as soon as possible. Do not leave it to the last month or you’ll end up short every time.

Follow a simple template of setting aside money for the holiday season regularly from your monthly income. Holiday season is a certain event, you can plan ahead.

Since you have already prioritized expenses, you can save for each category one at a time.

7.  Don’t Borrow Excessively

A major mistake made by many is to borrow without planning for holiday shopping. Don't go overboard with “buy now, pay later” or 0% APR credit card slogans.

These are as useful as your income allows. If you fail to repay in time, you’ll end up paying excessive interest on these credit cards.

8. Take Advantage of Seasonal Discounts

Start shopping early for the holiday season and look for seasonal discounts. Almost all brands offer coupons, sales, and cash discounts during the holiday season.

Then, look for deals that align with your spending needs as listed. Don't just spend money on items you never use just because they offer a discount.

9. Don’t Buy a Gift for Everyone

Christmas is a great event not because you give or receive gifts only, but because you spend time with your loved ones.

Normalize saying no to expensive gifts this time. Alternatively, offer personalized and hand-made gifts to your loved ones.

Prefer spending time together over spending money. Remember, when you give a gift to someone, you’re obliging them to give back.

A good way of having fun without spending much is to share event expenses. For instance, ask your visiting friends to bring a dessert for the dinner.

10. Review Your Budget Critically

Finally, an important aspect of personal budgets is the review stage.

Keep a track of your spending limits critically. If you overspend in one category, reduce spending in the next. Alternatively, save money from your regular expenses like avoiding a cup of your favorite outdoor coffee.

Adjust the budget accordingly and take a thorough review after the event too.