How To Decide on a Holiday Budget That Works for You

There may be no other time of year that makes us think more about how we spend money than the holidays. With gift giving a traditional part of the season for many, no matter which holidays you celebrate, you may be feeling the pinch before you ever spend a dollar. Lots of advice abounds on how to prepare, budget and plan, but how do you know which advice is best for you? Here we offer simple strategies from experts to decide on how to budget for the holidays.

We’ve Got You Covered: GOBankingRates’ Smart Holiday Spending Guide
Prepare: Shipping, Wrapping & More Extras To Account For in Your Holiday Budget

Set a Spending Cap

Before you even decide what you’re going to purchase, “determine your total amount available for the holiday season,” said Daniela Mounger, VP, Welcome Tech. “Make sure you leave some money allocated to emergencies. There are many programs and mobile apps that can help you learn and maintain a budget.”

Check Out: Your Complete Guide To Getting Ahead and Saving on Holiday Shopping

Make Your Money Work for You

Once you have that cap, he added, “It is not recommended that you spend beyond your available resources. Getting loans or buying gifts on credit will end up costing you more money and it will take you longer to pay off the gifts. Don’t buy to impress others, be frugal (even though others might interpret it as being selfish).”

Set Price Thresholds

Another way to look at a budget cap is as a “price threshold” according to Tim Connon, founder of ParamountQuote Insurance Advisors. “The best budget strategy for my family is establishing price thresholds. Pick a price for each one of your family members you cannot go over and pick the best gifts to fit that price range. So for Mom, it would be not going over $200. For children, not going over $300.”

Shopping Tips: Wrapping Paper, Greeting Cards and More Holiday Items to Only Buy at Dollar Stores


The simplest and smartest way to prepare for your holiday spending is to figure out your spending priorities, said Alli Williams, money expert and CEO of FinanciALLI Focused, a financial literacy company.

Make Your Money Work for You

See: 11 Gifts You Should Buy for Christmas Now — Before They Sell Out

“Go through your list of expenses and number them based on priority. When dividing up your holiday budget, you should focus on your high priority expenses first. For example, if gifts are really important to you, focus on that first. You might not be able to buy new decorations or send as many holiday cards.”

Strike a Balance

If you have prioritized your budget, made a list of what you plan to spend, you can attempt to balance out the holiday expenses by cutting back in other areas, said Kaymar K.S., CEO of World Consulting Group. “For example, if you are going to spend more on food this year, could you drive less in December to equalize out the budget. The more things you want, the more you may have to tighten purse strings, but looking at it this way can help you decide personally how important the holiday budget is.”

Important: The Ultimate Holiday Etiquette Gift Guide

Price Compare

Especially if you’re working within a limited budget, be careful about how you spend those precious dollars. “Do your research,” Mounger urged. “Before purchasing your gifts, make sure you compare prices from different stores and are aware of any valuable offers available such as store coupons, manufacturers discounts, two-for-ones or future savings.”

Start Saving Early

If you haven’t already, you still have time to start putting money aside specifically for the holidays, said Sonali Divilek, head of digital channels and products at Chase Bank. “Don’t let the holidays creep up and throw off your budget, it’s critical to start saving as early as possible. Utilizing mobile budgeting apps can help track and adjust daily spending so you can start saving.”

Helpful: From Airfare to Gifts to Your Tree, How To Save on Every Aspect of Holiday Spending

Consider Fractional Stock Rewards

One way to reduce your spend at the holidays is to take advantage of any consumer rewards programs that will give you deals and cash backs. But, according to Amy Dunn, SVP at Bumped, the tech company on a mission to create an ownership economy, a new way to get rewards is through fractional stocks.

Read: Where To Get Unique Holiday Gifts Without Leaving Your House

Through apps, “consumers can earn fractional shares of stocks with the brands they shop with everyday, and get even more back from brands they purchase gifts with during the holiday season,” Dunn said. “Fractional stock rewards are a simple way to make the money you already spend with brands you love, do more for you. For example, if you drink a $5 Starbucks every morning on your way to work, you’d be smart to link your card to the Bumped app so that you can take your coffee with a side of SBUX stock.”

Wiggle Room for Overspending

The fact is, you’re probably going to overspend somewhat, said Jake Smith, founder of AbsoluteReg LTD, but what matters is how much. “Overspending is fine, but you need to limit it to at most 20% more than your original budget.” For example, he said, if you plan on spending $1000, you will need to match your budget with the expenses by listing expenditures by the level of importance. “However, if the situation would tell you to spend more, you can add an extra $200 to your $1,000 budget to cover those other essential expenditures you have not listed.”

Spending Poll: How Much Will You Spend Over the Holidays Relative to Last Year?

This overage of 20% assumes you have money in savings to cover this expense, or know that a future paycheck will make it possible to pay off.

Find: The Best Holiday Shopping Strategies for Your Wallet 

Since the holidays can be complicated enough, make your holiday budgeting as simple as you can. Focus on what matters most, which might not be spending a lot of money after all.

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About the Author

Jordan Rosenfeld is a freelance writer and author of nine books. She holds a B.A. from Sonoma State University and an MFA from Bennington College. Her articles and essays about finances and other topics has appeared in a wide range of publications and clients, including The Atlantic, The Billfold, Good Magazine, GoBanking Rates, Daily Worth, Quartz, Medical Economics, The New York Times, Ozy, Paypal, The Washington Post and for numerous business clients. As someone who had to learn many of her lessons about money the hard way, she enjoys writing about personal finance to empower and educate people on how to make the most of what they have and live a better quality of life.


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