12.06.24
Holiday spending is a big slice of anyone’s budget – between the groceries, the decorations, the travel, and of course, the gifts – it adds up quickly. In fact, according to Deloitte, the average spend per person during the holiday season (Nov 1-Dec 31) in 2024 is expected to rise to $1,778. That’s 8% more than last year. And I don’t know about you, but watching almost $2,000 melt away in just 2 months is a little painful (under exaggeration of “little”). That's why we’ve put together a guide on how to budget for the holidays, so even if you do spend over $1,000, at least you’ll end up on the other side with minimal – or better yet, no – debt.
1. Start planning early
If you only start your budget planning in December, you already missed out on crucial savings. With November’s Black Friday deals, it’s important to start planning early. Like, October early. If you’re just catching on now, you still have time. Start your list as soon as possible and put those items on a deal watchlist!
2. Review your last year spending
Pulling up your spending on last year's holiday season will be a good idea. You can ask yourself these questions:
Did you overspend or underspend the budget you set up last year?
Any impulse purchased?
Are there any areas I can spend less this year?
Has your current living situation changed, like having a new child or job?
Be honest with yourself while thinking about all these questions. Once you have the answers, it is time to make the changes.
3. Categorize your holiday expenses
Holiday expenses are any expenses that contribute directly to the holidays. It does not include any regular/ongoing expenses like rent, utilities, car payments, and so forth. Groceries, however, can be included if they contribute to a holiday dinner (like Thanksgiving) or any hosted holiday event where they’re required.
Categories can include:
Gifts: for family, friends, coworkers, teachers, etc.
Food and drinks: holiday meals, parties, or other events
Decorations: tree, indoor/outdoor lights, table centrepieces, etc.
Entertainment: tickets to events, souvenirs.
Travel: Flights, car rentals, accommodation, gas.
When starting your budget, you want to make sure that you start by listing out all the categories that apply, and being honest about which expenses are essential, and which you can do without.
What is a realistic holiday budget?
You may have heard this before, but a common guideline for budgeting for the holidays is to spend no more than 1% of your annual income. So, say you make $50,000, you should aim to only spend $500. You can do the math based on your own annual income to figure out how much you should be spending this year.
Don’t be alarmed if your budget is small! We’re here to help you make any budget work.
Saving Tip: While categorizing your holiday expenses, consider your spending from last year. Check if there are any categories that aren't necessary or have any alternative solutions. For example, last year, we spent over $500 eating out in the food and drinks category. This year, we should cook on our own.
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4. Determine where to spend the money
Now that you listed out your spending categories and – using the calculation above – your total budget, the next step would be to figure out how to divide that total amongst all the categories. That way, you don’t end up spending all of it on one and ending up going outside the budget to pay for everything else.
This is where you have to use your own experience to set out the plan. Make a weighing scale based on how important each category is. So, say you have a large family, you may want to put more money into the “gifts” section vs the decorations. Or if you're expecting to travel for the holidays, allocate more of the budget to that section.
Saving Tip: If you’re not sure where to start, look at your spending last year for the holidays to set a baseline of how much gifts, groceries, outings, etc. cost you to start making more accurate estimates.
Sample Holiday Budget
| Category | Suggested % of total budget | Planned ($) | Actual ($) | Difference |
|---|---|---|---|---|
| Gifts | 50% | $250 | $150 | +$100 |
| Travel | 0% | $0 | $200 | -$200 |
| Food & Drink | 30% | $150 | $100 | +$50 |
| Decorations | 10% | $50 | $30 | +$20 |
| Entertainment | 10% | $50 | $50 | $0 |
| Total | 100% | $500 | $530 | -$30 |
5. Start saving for the budget
Realistically, the budget means nothing if you don’t have the money to fund it.
Set up a sinking fund
Start saving early with a sinking fund, which is a savings strategy where you set aside money gradually for a specific, planned future expense. If your total is $500, you can work backwards to set savings goals weekly, bi-weekly, or monthly that will get you to that grand total in time for the actual shopping.Save a percentage on your weekly spending.
Add a percentage to your weekly spending and allocate it to a separate account. For example, if you decide to save an additional 1% on top of your weekly spending and this week you have spent $100 on groceries, entertainment, etc., you would need to put an extra $1 into your savings account for your holiday budget.
Saving Tip: If you aren't good at executing this tactic, there are multiple apps now that allow you to automate the process. For example, Acorns is an investing app that charges an additional fee on top of all your spending and puts the money into your investing account. You can withdraw the money anytime.Put your money in the high-yield savings account
A high-yield savings account provides a higher interest rate. This can help you keep your holiday spending budget separate from your personal savings accounts and earn higher interest while funding your holiday budget.
How to stick to a holiday budget
Once you have your budget planned out, you’re going to know exactly how much you should spend on each category. In the sample budget we built, that means that you shouldn’t spend more than $50 on the decorations or the entertainment. Of course, real numbers are going to be different, but as long as it all adds up to $500, no matter what the actual differences are, you should be cruising through the holidays without a crippling debt number hanging over your head.
But, knowing how much you can spend is half the battle. The other half is actually making sure you only spend that much. Here are our tips for sticking to the holiday budget:
Make a gifting list in advance
Rather than getting stuck paying full (or even marked up) price for last minute gifts, make a list of all the gifts you’d need to get early on, and put them on a watch list so you can be alerted to sales (or wait for Black Friday sales).
TextNow Tip: While some retailers like Amazon and Target have built-in wishlist features that can alert you to price changes, you can also use free tools like Honey or Slickdeals.DIY gifts or decorations
Some gifts can probably be DIY’ed (your coworker Susan would probably love a batch of homemade snickerdoodles just as much, if not more, than an overpriced scented candle), but if that’s off the table, know that decorations can most definitely be DIY’ed. Orange slice garlands, table centrepieces, even ornaments can be made at home. And if you’re worried it’s going to look bad or juvenile, there are plenty of TikTok and YouTube tutorials on how to DIY your own decorations that look even better than the store bought stuff. And let’s face it – most of that stuff either ends up in the landfill or taking up storage space. So DIYing not only saves you money, but the environment too!Look for deals and discounts on stuff you already use
This is more of a general budgeting tip but applies even more during the holidays. To make more room in your budget, consider the things you’re already paying for, and where you can cut back. This is where cutting back on your phone bill – or eliminating it altogether! – can really help. Same goes for any subscriptions.
TextNow Tip: Check out TextNow Perks to find discounts and offers for things like: free months on Disney+ or Hulu for family movie nights, free Walmart+ trials for free grocery deliveries during the busy holiday season, and more.Curate your social feed to help
Rather than scroll through endless videos of people who are spending hundreds (if not thousands) on home decor, gifts, and travel and feeling the pressure to do the same, manipulate your TikTok, Instagram, and YouTube algorithms to show you content that better aligns with normal consumption – budgeting, DIYing, small gifting, etc. There are plenty of Creators and accounts that fit that bill and will not only give you helpful tips, but make you feel better about your own holiday plans.
How to avoid impulse buys
We all do it – we see a video showing off some item we never would’ve thought about and now we must have it, or we’re walking through Target and just happen upon their seasonal section. Impulse shopping is normal, and it’s probably the hardest thing to curb to stick to a budget. Here are some quick tips for avoiding it this holiday season:
Create a shopping list and stick to it: if it’s not on the list, don’t buy it. As simple as that.
Set a 48-hour rule: If you see something and it’s not on a list, leave it for at least 48 hours. If after 48 hours, you’re still thinking about it and burning to buy it, you can. If you already forgot about it, or the desire has passed, you can also pass.
Unsubscribe from marketing emails: If you don’t know about it, you won’t buy it.
How to tackle credit card debt
We can’t talk about budgeting for the holidays without mentioning credit card debt. According to LendingTree report, In 2022, 35% of Americans took on holiday debt, with the average amount rising to $1,549. This seems in line with the number we initially talked about, which was $1,778 for overall holiday spending. This means that all the money being spent on the holidays is through credit cards, without the means to pay it off in a timely manner. So, how do you avoid it? We start with our budget.
How to avoid credit card debt
Create a budget
In our sample holiday budget, we used the 1% rule. But it’s important that you adjust the total budget number based on what you can actually afford. If $500 isn’t feasible with other surprise expenses (car repairs, house repairs, unexpected travel), make sure the number that is feasible is what’s reflected in your budget.Use your credit card like a debit card and pay it off with every pay check
One of the main reasons why credit card debt piles up is because of the mentality we have around it. I certainly started off my adulthood treating my credit card limit as money I had, not as money I was borrowing. It took me a while, but once I started treating my credit card like a debit card – meaning that I could only spend as much as I had/would have in my chequing account by end of month– my credit card debt (and anxiety around it) disappeared. So if you have a monthly budget and know how much you can spend based on the income you have coming in, take that number and set that as your credit card limit. Use the credit card as you would your debit to buy essentials (groceries, household items, bills) and only use it on non-essentials if there’s room in the budget. Most importantly, do not put off paying it off. Every time you get paid, pay off your credit card in full. If you’re using it within your budget, it shouldn't interfere with any of your other spending/saving plans.Set spending alerts
Most card providers will allow you to set spending limits or alerts on your card. This helps you stay within your budget when you don’t readily know how much you already spent, or what your progress is.Avoid “Pay Now, Buy Later” offers
Recent studies from Finmasters, show that Americans who used “Buy Now, Pay Later” (BNPL) as methods of payment owe on average $883. While some purchases can’t be afforded in full, it is in your best interest to budget and save for one of those purchases with a sinking fund rather than use BNPL to avoid debt further down the road.
Holiday planning and spending is exhausting and stressful. We all know that – but it doesn’t have to be expensive. The holidays are for spending time with people you love, eating the food you love, and doing the things you love. With our holiday budget tips, make it a time for a bill statement that you’ll actually love.
