How To Create Your Holiday Spending Fund

Smiling young couple buying Christmas presents online using a credit card and a digital tablet.
RgStudio / Getty Images

This holiday season, it might seem tempting to throw caution to the wind and bid adieu to any budgetary planning. Or, perhaps you’re expecting to go over your holiday budget out of necessity rather than choice. According to a recent survey conducted by GOBankingRates, 14% of Americans feel pressure to spend more than they are comfortable with this season.

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Although it might be extra challenging to stay within budget this year, with some careful planning and thoughtful spending, you can build an appropriate budget and find some financial peace this winter. Be sure to follow these tips to create your holiday spending fund and be financially ready when the holidays inevitably arrive.

1. Set a Budget You Can Afford

According to the GOBankingRates survey, 47% of Americans have a strict budget for holiday spending. In order to avoid overspending, financial experts advise staying realistic when creating this budget.

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“Rather than thinking about who you need to buy for and what you want to buy, set a budget that is based on you,” said Jay Zigmont, Ph.D., CFP, founder of Childfree Wealth. “The key is to not go into debt for holiday expenses. If you start with a budget, you can then find gifts that fit within the budget.”

When budgeting, keep in mind that items might be more expensive than usual this winter and prepare for higher costs rather than expecting to be able to stay within the same budget you had last year. By anticipating and preparing for extra costs now, your budget will be able to handle the extra strain.

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2. Create an Account for Holiday Spending

You can avoid the sudden pressure to spend all your rent money on holiday gifts by creating a separate savings or checking account dedicated solely to holiday expenses. While it’s advisable to create this fund well in advance so you can save a little every month, it’s never too late to start setting aside some money for the holidays.

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Simply put a small percentage of your earnings every month — or if you work a side gig you could put that income here — to dedicate to holiday expenses. Anything extra can go into this account so that when the spending season comes around, you are prepared with a separate account to pull funds from.

3. Use a Prepaid Debit Card or Cash

The majority of Americans plan to pay for their holiday spending using cash or a debit card, as 57% of survey respondents stated this will be their primary payment method. This falls in line with recommendations from financial experts.

“To give you a bit of stopping power, either put your budget on a prepaid debit card or use cash,” Zigmont said. “Don’t use your credit cards for gifts. If you use cash, you are more likely to realize just what you can or can’t spend money on.”

While it’s advisable to stay on top of your holiday spending by using a debit card or cash, other Americans plan to fund their holiday spending in other ways. According to the survey, 25% of Americans plan to use a credit card, 6% plan to use gift cards, 3% plan to borrow money and 2% plan to use their holiday bonus.

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4. Avoid One-Upping Your Spending From Last Year

In typical consumer culture fashion, Americans might feel pressure to buy bigger and better gifts year after year. While this might be society’s standard, escaping this expectation can lift a major financial burden off your back.

“You need to get out of the gifting arms race,” Zigmont said. “In an arms race, you keep buying bigger gifts for each other and may lose the spirit of gifting. My sister and I agreed a while back to just give each other cards, as we realized we were just giving the same money back to each other and losing meaning.”

5. Pick Up a Side Hustle or Sell Household Items To Boost Your Disposable Income

If you are worried you might go over budget this winter, it’s not too late to boost your income before the holiday spending frenzy begins. If you need money right away, you can sell your used furniture or household items on Facebook Marketplace and gently used clothes on sites like Poshmark and Depop. You will also be able to enjoy the holidays in a more de-cluttered living environment.

If picking up a side hustle is more up your alley this holiday season, you can easily create a dual income by picking up a pet-sitting or house-sitting gig or walking the dogs in your neighborhood. Often, families go out of town during the holidays, so any odd jobs to help traveling families can be quite profitable. If something more creative is your calling, you could consider freelance writing, selling arts and crafts, or running an Instagram or TikTok for other businesses.

More From GOBankingRates

Methodology: GOBankingRates surveyed 1,025 Americans ages 18 and older from across the country between Oct. 17 and Oct. 21, 2022, asking 18 different questions: (1) Do you plan on spending more or less on holiday shopping this year?; (2) With the current state of inflation, how much more do you expect to spend on holiday shopping this year?; (3) What is your favorite place to shop for the holidays?; (4) Do you have to change any of the following holiday traditions this year due to rising costs?; (5) Where do you do the majority of your holiday shopping?; (6) How much do sales factor into your holiday shopping?; (7) How much time do you take off from work during the holidays?; (8) How much would you typically spend on a gift for a family member?; (9) How much would you typically spend on a gift for a friend?; (10) Where have you noticed rising prices for holiday shopping/expenses this year? (Select all that apply); (11) When did you start or plan to start your holiday shopping this year?; (12) As the holiday season approaches, which of the following applies to you?; (13) How much do you plan to spend exclusively on gifts this holiday season?; (14) How much do you plan to spend on travel during the holidays?; (15) Who do you tip for the holiday season?; (16) Do you tip extra to service workers (food delivery, Uber, hairdresser, etc.) during the holidays?; (17) What is the primary way you plan on paying for your holiday spending?; and (18) What holiday purchases do you make at the dollar store? (Select all that apply). GOBankingRates used PureSpectrum’s survey platform to conduct the poll.

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About the Author

Maddie Duley is a content intern for ConsumerTrack writing about finances for GOBankingRates. She is currently pursuing a bachelor's degree in communication and design from the University of California Davis.
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