Creating a Holiday Budget and Sticking to It

(Psst: The FTC wants me to remind you that this website contains affiliate links. That means if you make a purchase from a link you click on, I might receive a small commission. This does not increase the price you’ll pay for that item nor does it decrease the awesomeness of the item. ~ Daisy)

There are two things that make all the difference in the world during the holidays. These two things mean the difference between starting the new year burdened with debt and starting it out free and clear.

  1. Making a budget
  2. Sticking to it

I went over this in the book, Have Yourself a Thrifty Little Christmas, but something this vital requires even more attention. (Get that book for FREE right here.)

How much can you really afford to spend?

The first thing you need to do when setting a holiday budget is to take a cold hard look at reality. If you were not putting a single dime on a credit card, how much could you afford to spend on Christmas without having to shuffle around your other bills?

For some of us, that amount may not be very high. I had a year once when all I could scrape together for gifts and food was an extra $100. That was the budget for me and 2 children. I didn’t have credit cards or access to any other money. That was it.

And you know what? We had a great Christmas. We engulfed ourselves in traditions, made everything from scratch, hit the thrift stores, and upcycled. As worried as I was that my kids would feel let down, they weren’t at all. They were thrilled with their modest gifts and enjoyed unwrapping them just as much as they would have enjoyed more expensive items.

So, when you think about what you can afford, be realistic this year. ONLY spend that.

Figure out how that amount will break down.

Once you know how much you’re spending, then make a list of the people for whom you need to get presents.

During the Christmas I mentioned above, I broke the budget down to $40 per girl, $10 for mom (so the kids could give me a present too), and $10 for some treats to go with our holiday dinner. Because we didn’t have a lot of extended family to buy for, it was a lot easier. We made cookies for neighbors, coworkers, and teachers from pantry supplies and everyone seemed delighted with our gifts.

With your budget, do the same. How much will you spend per kid?

Per adult? What will you do for friends, neighbors, and teachers? What about extended family?

Sort out what you’re spending ahead of time.

I’m a big fan of the “envelope” method. Each year, I divvy up the cash into an envelope with a label on it: Kid 1, Kid 2, Christmas Dinner, cookie supplies, charity, teachers – you get the idea.

This year, because I wanted to do some online shopping on Black Friday and Cyber Monday, I took the envelope method a step further and got pre-paid Visas for part of the budget for each daughter. That way, I could still keep track of what I spent and keep things even. This allowed me to take advantage of some great online deals for desired items, but didn’t open up the whole of my bank balance to what I might spend on a whim.

Let people know what to expect.

The best way to head Christmas morning blues off at the pass is to make sure that everybody knows what to expect that year.  Since my kids were old enough to understand it, I have always told them what their budgets were going to be. That way, they could make their lists accordingly.

Also, by giving them these guidelines (and sticking to them) I taught them the very valuable lesson of…well, reality. Kids whose families put it all on plastic have no idea how much this stuff really costs in comparison to what Mom and Dad earn. How can we expect to raise kids who will be money-savvy adults if we shield them from financial realities?

But don’t stop with your kids. If you have extended family that spends a fortune at the holidays, let them know that you will be doing things differently this year, perhaps with handmade gifts or something simple. Maybe other family members will also be on board with more simplicity – and perhaps they’ll even be relieved.

Stick to your budget.

Once it’s time to shop, it’s essential that you stick to your budget. Put your envelopes in your purse and head out.

When you get to the register, separate your items into orders for different recipients. This way, you can pull cash from their envelope and stay organized by placing the receipt in that person’s envelope. Don’t worry about annoying the cashiers by splitting your purchases up. Be as swift and organized as you can, but stick to your guns because this is the only way you will know when you have spent everything in your budget.

If there is money left over after your shopping trip, consider assigning it to a different envelope. You could splurge on an extra treat for your holiday mail or you could pop it into the charity envelope to help a family who is less fortunate.

Stay organized.

When you are finished shopping, keep your receipts in the appropriate envelope. This will make your life much easier if something needs to be returned after Christmas.

Stop spending!

One issue that I sometimes have when I get all my holiday shopping done early is that I am tempted to keep spending. If something “perfect” catches my eye after my shopping is complete, it can be hard to say no to it. Then, especially if it is something for one of my children, I feel obligated to get something for my other daughter. And round and round it goes.

I avoid this by staying out of the stores once I am finished shopping. Retailers pay marketers bundles of money to help part you with yours and they have all sorts of sneaky strategies. We’ll talk about that next.

How do you stick to your holiday budget?

Do you set a budget for the holidays? How do you decide what you’ll spend? How do you stick to your plan? Share your tips in the comments.

Creating a Holiday Budget and Sticking to It
Picture of Daisy Luther

Daisy Luther

Daisy Luther is an author and blogger. She's the single mom of two daughters and credits extreme frugality and a good sense of humor for her debt-free lifestyle. She is the author of numerous books, the editor of, and is the founder of a small digital publishing company in the emergency preparedness niche.

3 thoughts on “Creating a Holiday Budget and Sticking to It”

  1. *when my kids were little, we did all hand-mades: flannel pajamas, knit hats and sweaters, sewn shirts and dresses, quilts, jam, cookies, plants, candles, and so on. we had grandmas who had trouble with that.
    *when they were really little, we said santa would bring 1 big gift plus 2 little gifts for their sock. in those days, there were catalogs to look at and crayons to circle favored items–different colored crayon for each kid.
    *in november of the year my daughter was 4, she took to clambering up into my lap and rubbing my hands with a big grin. hmmm, this is not a cuddly kid. why is she doing that? because the more gifts mama is sewing, the rougher her fingertips are!

  2. When my boys were little. I told them one year that the amount of presents had nothing to do with how good they were, because they were very, very good. I remember feeling terrible that I couldn’t do what had been done the previous year. My boys received two presents each. One from me and one from Santa. That was all I could do. Then to my amazement and delight. My boys loved their presents! They had been carefully selected. Each boy got an inexpensive plastic truck and a treasure box to put their treasures in. The boxes were little tool boxes I’d found on sale. I was always asking them about the treasures they would find. To this day, over twenty-five years later, they still have their treasure boxes!

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