How Do You Budget For Holiday Spending?

Heard on the radio yesterday: “Hey people, there’s only 3 paychecks left until Christmas!”

The Holidays are coming! Black Friday ads are already being leaked. The new mantra is “Why not just buy it now?” You hear a lot of scolding about all the consumerism in response, but the malls always end up packed no matter way. Perhaps the best way to deal with this annual event is to simply budget for it? It’s not like these are surprise expenses – should it really matter how many paychecks are left?

The other day I was reading about a tiny credit union that my wife’s company partners with, and they offered a “Christmas account”. It’s just an extra savings account where you can put in regular deposits each month. My cynical side thought “How quaint… like anyone does that anymore.” Kind of like how layaway no longer exists.

Or does it? Here’s a poll exploring how people deal with the expected expenses of the winter holidays. Decorations, travel, food, gifts…

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  1. I expect the group of people who read personal finance blogs, on average, to be better with money than the general public. This poll should be interesting to see if that is the case.

  2. I dunno, I don’t save ahead of time. 😉 I do try to limit myself to the excess cashflow I have for the month, though. (This is what I mean by the 2nd choice.)

  3. I started setting some aside the last couple of of months. For the month of November and December only half of my money that normally funds my emergency fund will go into my holiday fund. Looking to next year, I hope to just set aside the same amount each month so I don’t have to divert funds near the end. It should be easier now that I am using Mvelopes online budgeting.

  4. I plan on charging my purchases on a rewards card for the % back and paying in off in Jan.

  5. Ted Valentine says:

    None of the above. My wife shops all year and is already done.

  6. @Jonathan
    I figured that’s what you meant by the second option, which is why I clicked it, as that’s what my wife and I are doing this year. We’re just not going to spend like we usually would on frivolous things, and instead use our discretionary money for Christmas. However, there is an option that you didn’t really mention that we’ve used the past couple of years. The job I had up until a few months ago paid me bi-weekly. I made our budget based on 2 paychecks a month. This meant that we had 2 months a year where we had an “extra” paycheck. And one of those was around Christmas time, so we just used the “extra” paycheck for Christmas.

  7. I “dip into savings”, but the account is meant for things like this. I don’t save money specifically earmarked for Christmas (or for other annual expenses, I just save in a general account, with full intentions of using it for things like this.

    I also get a year end bonus that should cover my shopping and more 🙂

  8. The last couple years, I’ve gotten a bonus around $3,000. I used part of that to pay for my holiday shopping. However, in February this year, I began putting $75/month into a “Christmas 2007” fund at ING Direct. I then upped it to $100 in October. This will allow me to put my entire bonus into my savings when it arrives this year. I also didn’t want to count on receiving a bonus just in case my company decides to sign everyone up for the “Jelly of the Month” Club in lieu of giving out bonuses.

  9. My wife and I have an automatic withdrawal set up every month to deposit a set amount into our ING Direct account. I find it takes the stress off the holidays – this amount is for everything from gifts, new decorations, turkeys.

    One other thing we do is cash in our credit card rewards from our credit card for gifts. This provides us with about $300 in extra money to buy gifts for people.

  10. Whew! I’m glad that I’m not the only one who doesn’t spend enough to alter my usual spending patterns!

    The only people I buy for are my mother and my sister and quite frankly my mother doesn’t want anything that I can afford, and my sister and I usually end up giving each other 2 or 3 suggestions under $30 each and say ‘surprise me’. I don’t think I’ve ever bought something for them that they didn’t already know they were getting.

    I hope I never marry into a big gifting family.

  11. Secret Santa is a lifesaver. My husband and I only have to get gifts for each other, our respective secret santas, and our nieces and nephews. Holidays have become so simplified.

  12. I buy everything online through Ebates or Fatwallet, and I use my Fidelity Signature credit card to earn another 1.5% cash back. Of course I pay the card off promptly!

  13. I’m in the Save All Year camp. I started out by fully funding a “gift” savings account with X$, while at the same time dividing by 12 to save for the NEXT year. I shop all year round so that I never miss out on a great deal. Because I’ve saved all year, my account is always fully funded every January. Works great for me:)

  14. Following your advise I set up a pear budget and have a “gifts” irregular spending category. I budget about $50 a month and the irregularity of births, weddings, etc. usually leaves me with a couple zero months that I can balance out by christmas shopping.

    It will be interesting to see if high gas prices and slow economy really do effect consumer spending this season, as some experts are predicting. I think our extended family is downscaling this year. Seems like we all have a lot of stuff already…

    Any idea what average person spends on gifts for Xmas; yearly?

  15. you forgot one category: I don’t buy holiday gifts.

  16. Wow Jonathan, AJAX-enabled polling control! Very nice!

    As to the actual poll, I’m a “save all year with a twist”. When I lived in Winnipeg, we had about a 20 person circle (family), so gift-giving was pretty constant. I just started a cash fund for all gifts (except the GF) and I threw money into each month. The balance was usually very small in January and it would grow all the way through to x-mas and then restart.

    This worked well for me b/c I didn’t really have any b-days in January 🙂 It was also nice to be able to have cash readily available. If I couldn’t hit a bank machine or just needed emergency cash, I usually had a couple hundred in the tin.

    Now that I’ve moved and I’m surrounded by a different circle of family, I didn’t do the “cash bin” thing this year. But that’s more likely the exception rather than the rule, I expect to go back to the “bin system” in January when the finances are more stables (moving is bad for your pocketbook)

  17. My immediately family doesn’t celebrate Christmas, which saves me a lot. We celebrate with my dad’s family, but I’m responsible for one adult (name-drawing), my grandma, and my younger cousins (still chidren). Since I give my cousins birthday presents, Christmas really doesn’t add that much onto my gift-giving list.

    (However, one of my 2008 goals is to start a gift fund for all gifts–birthdays, weddings, showers, etc. I’d like to make gift-giving a budget-item.)

  18. Multi-approach here. I save each month all year, but I also buy a lot of gifts throughout the year. I like the thrill of Black Friday, but I might skip it this year… too much planning!

  19. Baba Ghanoush says:

    Holiday/Birthday spending is a separate sub-account of my Freedom Account , so I save for it all year long.

  20. I just charge everything and pay it off in January, so I picked number 3, but in actuality it’s more like (2). Because I never spend more than $1K on all my presents combined and I have discretionary spending of just about $1K a month. So either I give up my December or January fun spending. I don’t budget for this — it’s part of my fun money and luckily, for now, I don’t have to worry about it. A few years ago was a different story.

  21. I have one of those Christmas savings accounts. It occur to me my money would be best placed in a high yield savings account with the rest of my savings. I do plan to do this next year.

    I like saving all year. My budget also includes presents for the household. Quite frankly, I like going all out for Christmas with a budget. It is something I look forward to all year, and I don’t believe it is silly.

    It was my savings from October to January that allowed us to have a Christmas the next year. In January we both got laid off from out jobs. That $400 was very nice to enjoy at Christmas. It was a great reward.

  22. e. None of the above.

    My wife buys the presents (except for special Santa requests like a Dora kitchen. Not god forbid, some other kind of kitchen which may be bigger, it just isn’t Dora. Santa better not run out of Dora kitchens again this year because no one wants crying kids on xmas morning). I pay the bills. Everyone is happy (well sort of).

    Jonathan, you budget for kids yet?

  23. I save money all year round. I enjoy giving Christmas presents and like to know that the money will be there.

  24. sfordinarygirl says:

    Holiday spending gets out of control and ridiculous. So I’ve stopped giving gifts for the holidays a year ago. It’s too difficult and expensive. And half the time my family hates getting something they don’t like or use which takes up space and leads to future griping about clutter in the house.

    I bake instead. I like to do something special such as cookies or different types of cakes for people. For friends they just get a card with a well-thought out message thanking them for everything including let me crash at their places when I come visit. They also get cookies or some kind of dessert I make. The time it takes to write all those cards means more than anything I could buy.

    Sometimes the best gifts come from the heart …

    No christmas bonus where I am, though I’m kinda glad. Otherwise I’d start depending on it and buy stuff.

  25. I just got a ING Direct account where I’ve started saving for these kinds of things- didn’t realize other people did the same.
    This is unrelated, but a funny and creative video I saw for a Forex trading company:

    Happy Holidays,


  26. Ted – Shopping all year round is an interesting idea. I’m sure I’m not that thoughtful, though 🙂

    Alan – Charging on a rewards card to me and then paying it off in full isn’t really going into debt to me if you pay it off the next month. Hopefully people aren’t choosing that option. I mean carrying a balance. I’m never good at making polls.

    Max – “I hope I never marry into a big gifting family.” It’s not that bad 😉 The positives outweigh the negatives.

    teeej – “Any idea what average person spends on gifts for Xmas; yearly?” I think it’s around $1,000 or $1,500 a year from shopping surveys (that some say may be biased… to shoppers).

    Tim – “you forgot one category: I don?t buy holiday gifts.” That’s what I also hoped to capture in the the ‘don’t spend enough category”

    Gates – Move to WordPress, lots of goodies 😀 Yes, moving is definitely bad for the pocketbook. Now try doing it 3 times in 3 years…

  27. Me, plonkee – “I like saving all year. My budget also includes presents for the household. Quite frankly, I like going all out for Christmas with a budget. It is something I look forward to all year, and I don?t believe it is silly.”

    Right on, I think that’s the best attitude to take if you are serious X-mas celebrater. It’s always fun when people are really passionate about things.

    sfordinarygirl – Food is best gift for me!

    markh – I have to budget for kids?!? Uh-oh… I don’t know if I could stand all that kid gift-finding stress.

  28. I charge a ton on Black Friday … and spend practically nothing around x-mas. But then again, we funnel everything through our CC to get miles points.

  29. Bah Humbug! Can we skip to January yet? 😉

  30. I answered dip into savings/charge but what actually happens is; My wife has a part time job and that check is direct deposited into it’s own savings account. That account pays for the kids summer camps and holidays.

    I suppose we mostly leans towards ‘put money aside’ but I answered the poll as such because some years we do hit the charge accounts. Three years ago we did and we probably will this year as well. The reserves are running low from a spectacular amount of travel this year. (Overall $ in the 5 digit range.)

    I would guess that we are in the neighborhood of $2000 for Christmas. Approx $500/child (x3) and the extra food and such for parties.

  31. I work like Teeej.

    We use an envelope system for budgeting (a la Quicken) and one of those electronic envelopes is “Gifts Given”. Each month we put $150 in the envelope and that covers gifts of all types: birthdays, valentine’s day, anniversaries, mothers/fathers day, weddings, showers of any kind, and Christmas.

    Naturally, all months stay under and some months we don’t spend anything, so the balance builds throughout the year and we have $500-$600 come Christmas time. Works like a charm!

  32. Have you ever thought about using Geezeo, a FREE web-based personal finance manager to help you track your money and stay on budget? It’s helping me out a lot this holiday season already, and I feel less stressed about my finances!!

  33. I have an annual HCSA from my employer that is used for child-care.

    I save the max in this annually (5k) which is a nice tax-deduction and let it build-up all year. Then, come Nov/Dec I just cash-in a bit of it to use for Christmas. The rest will go toward savings/debt.

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