How To Make A Holiday Budget And Stick To It

No matter which holidays you celebrate, winter can be an easy season to out you in debt. According to a recent MarketWatch Survey, 27% of Americans plan to take on new holiday debt this year, with 63% expecting to spend more in 2024 than 2023.

We hope these guidelines will help you set a budget you can stick to, for everything from buying gifts to hosting. We’ll help you come up with a plan for any debt you might take on to enjoy the holiday season a bit more easily this year.

Make A Plan

One of the best things you can do to help yourself financially during the holiday season is make a plan, which should include a budget for holiday spending and, if applicable, a debt paydown plan for any expenses you may not be able to avoid this holiday season.

Frame this in the context of your financial situation. Think about whether you’re easily paying your recurring bills on time. Then, consider any financial goals you’re contributing to and whether you need to pause or reduce any to keep up with the holiday season.

Set A Budget

If you know how much you spent last year during the holidays, consider whether you want to increase or decrease your budget his year depending on your financial situation. If it took you months to dig your way out of debt, consider spending less on holiday purchases. If you use the Rocket Money^SM app, you can easily check last year’s spend and track this year’s purchases with a specific category like “gifts,” or a custom category like “holidays.”

Wondering how your spending measures up? According to the same MarketWatch survey, the average shopper expects to spend $1,159 on holiday expenses across gifts, travel, and other holiday expenses like decor.

Arrange Your Expenses Into Categories

It can be easier to think about a holiday budget if you break expenses up into specific categories. Below are a few you can use to get started.

Gifts

A typical holiday season for many Americans includes gifts – and there’s sometimes a lot of pressure to have a long list with just the right item for each person. Make a list of who’s going to receive a gift. Consider a budget for each individual and don’t forget to account for gift wrapping and shipping.

Travel And Lodging

Travel and lodging costs can go sky-high during the holidays. It’s best to book airfare early for better deals. Or consider staying with family to reduce your spending.

Planning to fill your luggage with gifts? Before boarding your flight, be sure to crunch the numbers to see how much you’ll pay in checked bag fees. You might also consider shipping gifts directly to your destination to spare you the extra baggage.

Food

What’s a holiday get-together without plenty of food? Whether you’re enjoying a huge home-cooked dinner with loved ones or dining out, food costs can add up in a hurry.

If you’re hosting a big family gathering, plan your menu early and run the numbers to get an idea of how much it’ll cost to feed your guests. You might also consider hosting a potluck and invite all your guests to bring their favorite holiday meal or side dish.

Decorations

Whether you DIY your decorations or head to a big-box store, decor-related costs can add significantly to your holiday spending. Make sure to account for these in your budget and consider lower-cost alternatives or skipping some if needed.

Donations

There’s more to holiday giving than just gifts: Donating to your favorite charity is a great way to share the spirit of the season. You may even get the benefit of some nice tax deductions.

If you already have a favorite charity, you might notice them sending end-of-the-year solicitations for money. This serves as a good reminder for you to send your donation in so it can qualify for the current tax year.

Entertainment

The holiday season is also the time for big movie openings, live theater, concerts and other events. Costs can add up quickly, especially once you include popcorn and soft drinks. Be sure to account for these outings when you put your budget together.

Winter Apparel

Holiday shopping isn’t all about gifts. You might want something new to wear to your company’s holiday party, or simply need a new jacket to keep warm. If you have children, it’s possible they’ve outgrown the clothes they wore last winter. Consider including these in your regular budget or holiday budget depending on your needs.

Get Ahead of Any Debt

If you’re one of the many Americans who expect to take on some form of debt this holiday season, create a plan now to tackle it. List all debts with their interest rates, and choose a paydown strategy like the snowball method for quick wins or the avalanche method to save on interest. If eligible, you might consider a 0% APR credit card to pause interest while you pay off the balance, but be sure to pay it off before the promotional period ends, usually in 12 – 21 months. With a clear plan, you can enter 2025 on stronger financial footing.

4 Ways To Stick To Your Budget

From buying gifts within your budget to paying for all the food and festivities, covering the various costs that often come with the winter season can seem daunting. Here are some strategies that can help.

1. Get Creative

Thinking outside the box when it comes to your gifts may help you save during the holiday season. Consider experiences you may be able to provide during the holiday to help you save over more traditional gifts. Some examples might include gifting DIY decoration supplies to start a new holiday tradition, give parents of newborns your time in the form of free babysitting, or maybe promising an experience you can do with a loved one later in the new year. 

2. Hit The Sales (But Plan Ahead)

There’s no shortage of retailers vying for your business around the holidays. From Black Friday specials to Cyber Monday offerings, you can score some solid deals – just make sure they’re planned for and fit within your budget. If you’re planning far ahead, you might even take advantage of Labor Day sales.

3. Use Cash-Back Options Responsibly

Using cash back platforms like RetailMeNot or Rakuten, and even cash-back credit cards can help you recover a percentage of the money you spend. That said, when it comes to these cards, make sure to pay them off immediately or the interest may cost you more than the cash-back benefit. 

4. Build Savings Throughout The Year

Speaking of next year, while it may be a little late to save for the current holiday season, using a high-yield savings account, which have higher interest rates than a standard savings account, is a great way to plan ahead. Keep in mind, this should be separate and in addition to an emergency savings account, so you don’t mistakenly pull from your emergency fund.

The Bottom Line: A Holiday Budget Can Help You Dodge Debt

By creating clear spending categories and looking for ways to save on seasonal purchases, you’re more likely to emerge from the holidays without putting a huge hole in your wallet. If you do anticipate taking on debt, try to do so in a smart way, using cash-back programs or cards that play to your advantage.

Need help tracking your holiday spending and debts? Download the Rocket Money app and get better visibility to help keep your finances in great shape for 2025.