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How Do You Budget For—And Pay For—Your Holiday Spending?

Readers comment on how they budget for holiday shopping and keep Christmas gift spending in check.

I admit that when it comes to holiday shopping, I’m a procrastinator. I have been witnessed scurrying to the mall or Target on Christmas Eve. That said, I do begin to put some money aside around this time of year so my Christmas shopping doesn’t totally screw with my December or January budgets. And when it comes time to shop, I make a list of everybody I need to buy for, decide how much I can spend in total, and divide it up.

Today, I want to know:

How do you budget for, plan for, and execute your holiday purchases?

Let us know in a comment!

Published or updated on October 21, 2010

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.


We invite readers to respond with questions or comments. Comments may be held for moderation and will be published according to our comment policy. Comments are the opinions of their authors; they do not represent the views or opinions of Money Under 30.

  1. Janet says:

    I don’t worry too much about gifts over the course of the year. My husband and I have agreed that a nice dinner out (that we make fit into our regular monthly restaurant budget) is gift enough for each of our birthdays. For Christmas, we bought ourselves a joint gift this year for our home (a rug that we’d been wanting went on sale plus we had a 20% off coupon).

    This and the other holiday gifts that I bought for my family came from what I consider to be a brilliant “non-budgeting budget”. There are two things in play: first, sometime in the fall, I max out my social security taxes and *poof* my take-home pay goes up. (I can hardly take credit for this, it’s just based on income.) Second, I set up my 401(k) contributions to max out before the end of the year. Just like magic, extra money right when I need it!

  2. Dave Phone says:

    Sounds like a lot of work. I counsel people to act at this time of year just like the rest of the year. Try to see how much you can avoid spending. Many times all people want from you is for you to spend time with them and not a lot of extra junk, so if you are going to spend, spend time.

  3. In December I create a spreadsheet that tracks who I’ll be buying Birthday and Christmas presents for that year (family and friends are pretty standard each year). I also add 2 misc. birthdays and Christmas in case there’s a work Secret Santa, or I make a new friend. I then total that up and start saving. This has been a great way for me not to go crazy spending-wise, I allocate in general $50/gift. December is also when I start saving for the next years’ weddings.

    I am lucky that most of the birthdays I celebrate are spread out throughout the year and aren’t bunched together at the begining.

  4. David Weliver says:

    Thank you to everybody who commented and entered the contest! Winners have been drawn and notified. They are:

    Joseph: Grand prize, Dave Ramsey starter kit.
    George: Total Money Makeover Book
    Heather: Millionaire Next Door Book
    Stephanie: Your Money or Your Life Book

    Thanks again for participating!

  5. Nick says:

    How would perk street compare to becoming your own bank? I am literally my own banker, i borrow from myself and pay myself back plus interest. not only to i regain money usually paid to someone else but I also get my money out of the tax path FOREVER!!

  6. Bishnu says:

    I usually leave one paycheck free for gifts. I make sure I cover my expenses and the one paycheck that would usually go into my savings goes on gifts.

  7. Samantha says:

    I take holiday purchases out of my recreational/fun money over time. I look at how many people I’m obligated to get gifts for and try to be close to the same price range for relatives at the same level. If I see something that suits someone or would make a good general gift through the year I buy it and save it for the holiday season, their birthday, or another gift-giving opportunity.

    • Jenna Walker says:

      Hi Samantha,

      What if you didn’t have to take that money out of your recreational/fun money to pay for Christmas gifts? PerkStreet can make the holidays free. The average american is planning to spend about $650 this holiday season. If they spend that in our 5% holiday deal and then earn 2% with us on all the things they buy during the course of 2011, by this time this year, they’ll have earned about $650 — effectively erasing their holiday expenses from this year.

      Now that’s a great deal. Check us out by clicking the link in the article above.

      Good luck,
      Jenna Walker
      PerkStreet Financial

  8. Erin says:

    I still do what my parents did to us as kids– a per person cap on spending. When we were kids we were giving something like $10 a person. I’ve used that tool to this day. The obvious flaw for me is that sometimes I have too many people I want to give gifts to, so even a $20 cap puts me out of my budget. So, for the last 5 years I have put my talent and skills to work. This year nearly everyone will be getting a homemade jar of peach, plum, fig, or blackberry jam made and canned by yours truely. Right now the total cost for each jar is well under $2, but the gift is worth so much more given the time and care I have put into them. My friends and family have come to love my homemade gifts- they just require planning ahead and lots of time!

  9. Mike says:

    I have a list of bdays, holidays, & gift-giving occasions expected in the current year and estimate a budgeted amount for each event. I sum up the amount of all of these gifts (rounding up to next hundred) and divide that by the 26 paychecks I’ll receive throughout the year. Direct deposit does the rest….

  10. Amy Anderson says:

    I was finally able to talk my family down off the wall and agree to just doing stocking stuffers. Historically, we find the goofiest things in our stockings – from post-it notes to socks or hangers, tape dispensers, rulers, pens/pencils, once we even had a small trash can! But also good stuff like gift cards, earrings, hand made certificates for services by family members (baby sitting, cooking, cleaning, etc). I budget $100 for each person and have been automatically stashing away a set amount in Smartypig that will meet my goal on Dec. 1. I may put some on an Amazon gift cards, since Smartypig adds a percentage for certain places, but most of it I’ll just pull out to use on Etsy or the great local businesses in my hood!

  11. Jenny says:

    This year I figured out how much I want to spend on family and set up a budget in Mint. Every time I log in I can see what I have spent and what I have left. Right now its bright red because I have found some unique gifts for family, but I know that when I hit my max I’m done shopping!

  12. Stephanie says:

    I usually begin thinking about the holidays months in advance, so when it comes time to finally put down money for gifts I know exactly what I’m going to buy and how much it should cost me. I then put the amount of money I budgeted into a separate savings account until it’s time to spend it. In the months leading up to the holidays I keep an eye out for sales and coupons helping me to cut costs further.

  13. Jake says:

    Pretty much all of my ideas have been covered already, but this is my gift budget plan.

    Planning: I first look at how much I can afford in my monthly budget for gifts – for me it’s about $100/mo. I put this money into a high yield savings account. Then I set up my spreadsheet for each occasion and holiday present plus a little fudge factor and I determine how to best allocate the $1200 I will save throughout the year to each gift. In this same spreadsheet I also write down gift ideas so I can keep an eye out for the best deals throughout the year. It may seem cold and calculating to determine amounts based on a budget allowance, but honestly, I would go nuts and spend way too much if I didn’t hold myself to this amount.

    Tracking: I track how much I actually spend on each gift vs. the target amount when I allocated everything. This tells me how much I need to tighten up at the end of the year or how much wiggle room I have left.

  14. melanie says:

    I take the money out of my tax return, when I receive it back in April, and put it into an ING account specifically for Christmas. Then I have an excel spreadsheet that I set up with a declining balance. I basically know how much I will spend on each person, and I keep track of the purchases on my spreadsheet. I pay for all my Christmas purchases on a separate credit card, and then when the bill comes in, I transfer the money from my ING account into my chequing account and pay the balance off in full. No bills, no debt hangover, and a wonderful Christmas for the family :)

  15. Tim says:

    I use a number of plans, all working together. First, I use the Holiday Club my credit union offers and have a small amount of my direct deposit going in there each paycheck. Fortunately, that money is frozen until October 15. Second, I do budget my money based on 2 paychecks per month, so that spare bi-weekly paycheck I get in the second half of the year tends to be reserved for presents as well. Third, I also get rewards points for using my credit card throughout the year, so holiday time is a great way to cash in the “free money” and turn it into “free gifts”

  16. Amber says:

    I need to start budgeting for the holidays. I basically buy most of my gifts around Black Friday. I do not have a large family so I dont have many gifts to buy. As a family we spend most of our money buying the kids items and may buy each other one or two small items. As the kids get older-I know I will have to budget because they will want those expensive toys.

  17. Sarah says:

    I start gathering ideas of prices and gifts throughout the entire year. I save a little bit each month in a container at home (out of sight, out of mind – having it in a savings account at the bank doesn’t work because the account balance is visable online). Whenever I have an idea for a gift I determine how much money I need for that gift and develop a budget. Throughout the course of the year, I have a decent size list of gift ideas with prices. When I look at this list I go and count the money in the container and determine which items on the list I’m going to purchase. Having the list with prices and budgeting at the start of the year is wonderful. I never have to worry about not having enough money to buy everyone the gift(s) they want. Another “budget” I do is shopping on Black Friday and Cyber Monday. There are always excellent deals and I can purchase a good portion of the items on my list.

  18. Rodney says:

    I wish I could say we actually budget for gift giving. It used to be a whole lot more simplistic, but as the years go by our family and friends get married and have children of their own and the gift giving pool increases drastically. On top of that, as our own kids are now at school ages, we have several more birthday parties to attend and host. We’ve only recently decided that we need to start setting aside money for gifts throughout the year so we don’t get ‘surprised’ by the holidays.

  19. Leah says:

    Geez, reading everone’s comments makes me realize how little I ‘budget’. I’m still a student right now in grad school currently. I borrow money from my parents for living expenses that TAing does not cover. I don’t really have a lot left over each month to set aside for a x-mas fund. Usually around november I’ll start looking for good deals on the things that I want to buy. My parents tell me not to spend too much money because they know that it’s coming out of the money I owe them, so it’s not like they expect something expensive. With friends we don’t usually exchange gifts, or if we do it’s little ones.

  20. May says:

    My plan is easy: I’ve stopped buying gifts for Christmas and instead, spend time with my loved ones. For the past few years, I’ve bought my Christmas plane tickets home in June-August saving hundreds of dollars since the prices only go up the closer to Christmas.

  21. Meagan says:

    We really don’t budget, per se, for Christmas. We start a couple of months ahead of time looking around for things with a set amount in mind per person. When we find something we either get it right then, or make note of it and come back later. This way we don’t have to set aside money all year and we don’t blow a whole month’s budget either.

  22. Victoria says:

    I use a separate savings account… but I make all my gifts, so I’m spending only on cost of materials, and it’s far cheaper!

  23. Kiley says:

    Starting around the start of fall, I generally start putting together a list of who I need to buy gifts for and ideas of what I might get them. This lets me keep any eye out for any sales on these items which might come my way.

    I generally start putting money aside into a separate checking account that I don’t have debit card access to around August or September. Then when it comes time to shop for the items, I move this money to the checking account my atm has access to.

  24. Brian says:

    My wife and I always make sure to maintain a healthy “rainy day fund”. When it comes time for holiday shopping we often dip into that fund and use the money for gifts. Throughout the remainder of the year we are constantly replenishing that fund. We do not feel the need to set up a special account, we just keep a close watch on our overall savings/checking account and reduce unnecessary spending as we need to. We also try to pay for everything using our rewards credit card and paying it off monthly.

  25. Jim Miller says:

    Over the course of a month or two, I bank my pay check(monthly) and use the wife’s. we then spend the money from my chceks for gift’s food, and whatever.we give out around 30-40 gift’s to friends and family. most run $100.00 to $150.00

  26. Caitlin says:

    I do two things. First, I earmark a portion of my tax refund each year for holiday spending. By knowing how much I have to spend, I can effectively plan ahead and budget how much each gift I buy should cost, on average. Second, I look for deals during the remainder of the year (after tax refund time) that are in the ballpark of the average gift cost. Then I hide the gifts in closets for months. Smart for the budget… not so much for closet space.

  27. When I was a bachelor, I really didn’t buy anybody anything – maybe a little something for my parents and that was it. Now that I’m married, I’m expected to lay out $500 – $1,000 in Christmas presents this year. Ouch! People expect a lot more of stable “adults”…

    We try to buy some things in advance as we see sales, etc but my wife gets an extra paycheck in December so basically instead of extra savings it goes to Christmas presents.

  28. Joseph says:

    My wife is always thinking of others. Throughout the year, we’ll be in a store for something that we need, and she’ll point out something that would be a perfect gift for whomever. If it’s something we can afford at that time we’ll pick it up. If not we’ll make the effort to put money aside for it in the future.

  29. Peter says:

    Since I use my cashback credit cards (I have 2) for every purchase (I pay off the full balance), I use the cashback at the end of the year for holiday spending on friends and family. So, my normal spending does the work for me. Cashback is awesome!

    • Jenna Walker says:

      I agree, cash back is awesome! You should check out PerkStreet Financial (link in the article). We offer 2% cash back on all non-PIN purchases, as well as 5% cash back on popular holiday retailers until the end of the year. Having a PerkStreet account is a great way to earn credit card type rewards while spending responsibly on a debit card. We’ve learned that our customers use our account to stay on budget, get or remain debt free and give back to others through our cash back program. Check us out!

      Jenna Walker
      PerkStreet Financial

  30. Thomas says:

    Planning: My wife and I write down all the people we plan to buy gifts for (Christmas, Birthday, Anniversary, Mothers/Fathers Day, etc.), then we assign a dollar amount to each gift (a target maximum we’d like to spend).

    Budgeting: After performing the above tasks, we divide the dollar amount per person by the number of months remaining until we plan to give the gift. This gives us a $$/month figure for us to set aside for each person, which we then sum up with all the other people on our list to come up with a total monthly accrual for gifts. This, in essance, allows us to save up for gifts over the course of a year, rather than just a month or two (or zero). Makes things much easier.

    Executing our purchases: Generally, we make our purchases within the month the event/holiday occurs. Since we are saving up over time for these purchases, we do have some flexibility to buy some things early. For example, this year my wife is handmaking certain gifts and bought some items early so she could get a head start.

    Tracking: We track all our purchases in our budgeting software (YNAB) so as to avoid overspending.

    All in all, this method is not perfect. Sometimes we have to spend a little more on a gift than we planned, but having already saved up the majority of the amount makes it easier to cover the additional expense if/when they arise.

  31. Rita Martin says:

    I actually do not budget for holiday spending. I’ve been at my current job for 10 years, and every year I get a Christmas bonus. The bonus is sufficient to cover all Christmas shopping, so I rely on that and I am still able to use my normal paychecks that month to pay bills.

    While this might seem like a “cop out” compared to the efforts others must take to budget for the expenses, it really is a win-win because I have everyone’s gifts covered, I don’t get behind on bills, and I don’t use credit cards for gift-giving.

    The down side is that I wait until the week before Christmas to start (and finish) my shopping. Stressful, but well worth the financial benefit.

    As long as I’m at my current job, I can rely on this system. If that changes, I’m sure I’ll be looking to implement some of the others’ great advice posted here!

    • Jenna Walker says:

      Hi Rita,

      Using a Christmas bonus is definitely a good way to make sure that you have enough money to cover your holiday spending.

      What if you didn’t have to use that holiday bonus towards actual Christmas gifts?? PerkStreet can make the holidays free. The average American is planning to spend about $650 this holiday season. If they spend that in our 5% holiday deal and then earn 2% with us on all the things they buy during the course of 2011, by this time this year, they’ll have earned about $650 — effectively erasing their holiday expenses from this year. That way, you can put your Christmas bonus towards something else, like a treat for yourselves! :)

      Check us out by clicking on link above.

      Jenna Walker
      PerkStreet Financial

  32. Jenna Walker says:

    Hey everyone,

    My name is Jenna and I work in the Marketing Department at PerkStreet Financial. I love that everyone has great ideas about how to budget for the holidays! The 4 different giveaway options are great ways to improve your financial lives and stick to that holiday budget.

    Keep in mind that signing up for a PerkStreet checking account is another great way to stay on budget and get stay debt-free over the holiday season. The American earns over $600 cash back every year just from spending on their PerkStreet account! That’s a lot of extra money to put towards upcoming holiday purchases, paying off some debt or giving back to others.

    Simply click on “Learn more about PerkStreet or apply for a card” in this post for more information.

    Thanks and good luck to everyone,
    Jenna Walker
    PerkStreet Financial

  33. Tracy says:

    My husband and I have set up a Christmas Account through our credit union for $25 to come out of each direct deposit. I get paid bi-weekly and my husband gets paid monthly. So this November we’ll have $800 to go towards gifts. We have a large extended family we like to give gifts to. So we’ve already been researching gifts for our immediate family. The remaining budget will go towards stocking stuffers where we will play Christmas games for the extended family to pick from the “mystery bag”

  34. Josh says:

    Mine is simple as well, I typically start around August thinking of ideas (the hardest part of gift buying) and start buying once I get them. The best part about starting early is the opportunity to find great buys (clearance too) rather than being left with no choice. See…..Simple!

  35. Heather Alarcon says:

    Last January, my fiance (now husband) and I had a somewhat painful, extremely elucidating, conversation about gifts. We made a spreadsheet identifying all of the occasions when we would need to buy a gift – birthdays, christmas, new babies, weddings, mothers day, housewarmings, hostess gifts, etc – and then negotiated the right amount for each gift. This resulted in the need to create separate categories, e.g., birth of a niece versus a friend’s new baby, as I might buy a $15 onesie for a friend, but I bought a $250 crib mattress for my sister. Setting the amounts truly was a compromise, because while I, personally, think buying one of my sister’s the moon would not be unreasonable, my husband persuaded me that we couldn’t afford to be that generous in the future – and looking at the year as a whole, and how things add up, I had to admit that he was right. Then we estimated how many of these events would happen during the year. Some of these numbers are obvious – e.g., my dad only has one birthday – but others ended up changing throughout the year, and still others were wild guesses (e.g., how many times will we be invited to someone’s house for dinner?). The spreadsheet generated a total figure based on our estimates. When this was too big, we went back and reconsidered how generous we are being with certain gifts. When we finally got to a place we were comfortable, we divided that number by 26, and set up an ING account to directly deposit an amount from each pay check into the “gifts account.” We pay for gifts using our travel rewards credit card and pay the card from the gifts account. We’ve had to amend during the year to accommodate for new wedding invitations and baby announcements, but this generally means that we lower the amount we spend on other gifts until we get back to our original figure. SInce I’m the one that does all the shopping, having these guidelines helps. And we know that this year we won’t have the January post-Christmas burn – so long as stick to our plan!

  36. Travis says:

    I have a “gift account” as well where money gets directly deposited from my paycheck to cover holidays and birthdays. I am an avid fan of Early Bird Specials during Black Friday, but you must do your homework to guarantee the best bargins. The week before Black Friday, I get sales papers from all of the participating stores in my neighborhood and map out gifts that feel people would want. Then I cross-check the advertised sale price to make sure the discount is worth the hassle of fighting crowds. If you organize your route that morning by store hours and proximity, it’s really not that bad! Even better, get a few friends to go with you and divide and conquer!

  37. George says:

    I make my monthly budget based on two paychecks per month, so every year I can set aside $500 from one of the two “extra” paychecks to pay for holiday presents.

  38. Tekla says:

    I put extra cash in a separate savings account (SmartyPig/ING) and use that and the interest over the year to buy holiday/birthday gifts. I also start planning ahead, so if I see a deal, I get it early.

  39. Bryan says:

    This is a very basic concept for me:

    Every month, I deposit $100-150 into it’s own checking account. Throughout the year, this account takes care of all the birthdays, Mother/Father’s day, ect. At the end of year, there is always enough money still in the account to go Christmas shopping for the entire family. When I do the Christmas shopping, I use my rewards credit card, and then pay off the balance as soon as I get the first bill.

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