Penny-Pinching Presents: How to Do Christmas on a Budget

Christmas may evoke a host of emotions—joy, nostalgia, gratitude, love. But amidst the holiday cheer may lie financial anxieties, a pressure to create the “perfect” Christmas. With elaborate decorations, gifts for family and friends, and all those wonderful meals, the holiday may strain even the most well-intentioned budgets.

Just as Santa Claus himself meticulously navigates his global gift-giving mission with efficiency, you too may be able to strategically approach the holiday season. By focusing on budgeting for the holiday season, you may start to settle into the celebratory joy of Christmas. You can also keep your focus on your financial wellbeing and avoid common retirement planning mistakes.

Assessing Your Holiday Finances

Before diving headfirst into the gift-giving and festive decorations of Christmas, an important first step is to assess your holiday finances. This proactive approach is the foundation for your holiday budgeting so you may celebrate without potentially jeopardizing your financial well-being.

Some steps that may help with assessing your holiday finances include:

  1. Know your income and expenses: You may consider gathering all your bank statements, pay stubs, and bills to get a clear picture of your monthly income and expenses. Once you have this information, subtract your total monthly expenses from your total monthly income to reveal how much money you may have to spend on the holidays.
  2. Review your holiday spending from the previous year: Look back at the previous year to see how much you spent. Bank statements and receipts are helpful. Understanding your spending habits may let you set real goals and identify where to potentially cut back.
  3. Factor in your non-gift holiday expenses: This may include meals, decorations, travel costs, and potential charitable contributions.
  4. Consider your finances for upcoming life events: You may want to think about bills, vacations, or potential emergencies and how many funds you may allocate towards those.
  5. Identify your overall financial goals: You may feel inclined to note upcoming aspirations including homebuying or retirement.

Considering these steps may help you better plan for a budget-friendly Christmas and other priorities after the holidays end.

What is a Good Christmas Budget?

There isn’t a one-size-fits-all answer for a “good” Christmas budget. Several factors you may consider when deciding on your personal Christmas budget include your income, your expenses, your financial goals, and the amount of people you’re buying for. You may consider spending no more than one percent of your annual salary

If you’re really curious about this question, it might not be a bad idea to bring this up in a retirement meeting with your financial advisor.

Finding Deals and Discounts

If you’re considering becoming a savvy shopper, browse for deals and look for coupons. Start by planning ahead and browsing for potential deals well before December. (You could even make it a “Christmas in July” tradition to begin planning for the holiday.) Sign up for email alerts and follow your favorite stores on social media to stay informed about upcoming sales and promotions. Don’t forget that numerous websites and apps specialize in aggregating coupons and discount codes as the holiday season rolls around.

Outlet stores and discount retailers may also be hidden gems for your shopping spree, but don’t be afraid to compare prices across different retailers or ask about price matching (often allowed if there’s an online and in-store difference). Through these deals and discounts strategies, you may see yourself transforming from that stressed out shopper into a more confident deal-finder.

Christmas on a Budget Ideas

Christmas is a wonderful holiday but that doesn’t mean it has to come with an extravagant price tag. Embrace creativity and resourcefulness that still allows for a memorable holiday season.

Sometimes smaller and more thoughtful gifts present themselves as nice budget ideas for friends and family. You can bake them goodies, craft personalized ornaments, or sign them up for a subscription box trial—all budget-friendly and heartfelt options. Even a donation to their favorite charity in their name shows you care and have put thought behind the gift.

Regarding how much to spend for friends, family, and your significant other, the real answer is to spend what you're comfortable with and what you can financially afford. But some guidelines you may consider include:

Close friends: You may spend as much as you would if you both went out. If you typically spend $30 on a night out, then $30 might be the most reasonable amount for a gift.

Family: For immediate family members, you may shell out a bit more in the $50 to $100 range. As you move to closer relatives (think nieces or nephews), you may lean more towards $25 to $40, and for family you don’t see often, $5 to $15, if any gift at all.

Significant Other: This may vary the most, but if you’ve dated for less than one year, you may pay around $50. For people who’ve dated longer than one year, you may consider $100. Married couples may spend around $100 to $300.

These are rough guidelines that you may follow, but the truth is, the exact amount you pay is completely up to you and what you feel financially comfortable paying.

Managing Holiday Related Expenses

As you shop and fill up that space beneath your tree, you may consider tracking your expenses, whether through user-friendly budgeting apps or a simple spreadsheet. This can provide a clear picture of where your money goes. 

This real-time data may empower you to make informed decisions including areas to cut back, find more affordable gifts, or forego non-essential purchases. Regular review allows for adjustments to your budget and may keep you on track to potentially avoid post-holiday financial strain. 

Holiday Decorating on a Budget

We know the holidays don’t come without the many amazing and nostalgic decorations. And while we all love the look of them, they may be costly. Consider crafting your own decorations with popcorn garlands, mason jar candle holders, or natural pine cones. You may repurpose old items or forage for free winter decorations like branches and berries. There’s also the option to string affordable LED lights outdoors and use fairy lights or candles strategically indoors. Festive touches like throw pillows and centerpieces can add holiday cheer without breaking the bank. 

Deals and discounts at holiday stores may be a great way to save some money while finding budget decorations, but one of the nice parts about the holiday is it’s often more about the cheer than the tinsel and the flair.

Interested in learning more about cash flow analysis or retirement planning? Consider attending one of our retirement seminars or webinars, hosted by experienced financial advisors who may be able to help you.