How to Plan a Christmas Budget

Whether you want to plan for the upcoming holiday season or get started on planning for next year, creating a Christmas budget is always a good idea. With a little bit of planning, you can prevent the dreaded crunch to find money to pay for gifts during the holiday season.

1. Determine Cost

The first step towards creating a Christmas budget is to determine the total cost of your holiday spending. List each person you need to buy for and the maximum dollar amount you will spend on each person. When in doubt, list the highest amount you think you want to (or need to) spend. Don't forget to add small gifts such as the office gift exchange or your regular baby sitter. These little gifts can add up quickly.

You may choose to budget for gifts only, or you may want to add the cost of food for family get-togethers, holiday decorations, etc. It is up to you what you feel you need to budget.

When you have a total dollar amount, add 10-20%. After all, everyone underestimates spending during the holidays or forgets about a few gifts that need to be purchased.

2. Determine Sources of Cash

After you have calculated how much money you need for Christmas, the next step is determining exactly how you will produce the Christmas money. Some possible sources may be money stashed in a savings account, a yearly bonus, money saved throughout the year, or income from a second job.

If relying on a yearly bonus, make sure it is dependable. Employers often change amounts of bonuses, when bonuses are awarded, or if a holiday bonus is given in a certain year based on company results. Relying on this type of income may not be smart if it is not guaranteed.

A good way to save for Christmas gifts is to put money in a separate savings account monthly throughout the year. This prevents scrambling for cash at the end of the year. Divide your determined cost by 12, and then put that amount in a savings account at the end of each month. You will be happy at the end of the year to be relieved of the financial stress of the holidays.

3. Stick With It!

Perhaps the most difficult part of Christmas budgeting is sticking to the plan. It is easy to put off saving for Christmas with other expenses pop up throughout the year. Just remember - when you have planned your Christmas finances, your holiday season will be free of financial stress and aggravation.