To get ahead you have to stay informed.


How to Create and Actually Follow a Holiday Budget


Holidays can be stressful, and a large part of that stress comes from extra expenses we’re managing on top of our usual bills. Creating a budget for the holidays eliminates the pressure to “find” money or dip into regular savings.

Creating — and sticking to — a holiday budget is simpler than you might expect. Here are a few tips to get you started.


Steps to Creating a Holiday Budget

Creating a holiday budget is surprisingly simple. In fact, it’s a lot like creating a personal budget. With a few steps, you can outline your holiday spending plan and take much of the stress out of the festive season.

1. List Out Your Expenses

The first step to creating any budget is to figure out what your expenses are. For most people, that includes:

  • Gifts
  • Wrapping paper
  • Greeting cards and postage
  • Travel expenses
  • Food
  • Work gift exchanges
  • Decorations (inside, outside, or both)
  • Activities
  • Charitable donations

Your expenses may vary some from this list. If possible, review bank and credit card statements from last year to see what you spent money on. This will give you a reasonable starting point for your budget and it will help you recall small purchases you may have forgotten.

2. Calculate Costs

Once you know what you need to buy, you can start figuring out the costs. Some expenses stay the same most years, but others (like food and travel) can change a lot from year to year.

Don’t worry if you don’t know the exact cost of things — you can revise your budget as you work. And while it’s ok to guestimate at first, remember that it’s better to overestimate costs than underestimate.

3. Find Ways to Cut Costs

Once you know your ideal budget, look for ways to cut back. Here are a few simple ways to revise your holiday spending:

  • Scale down. If you have a smaller family, consider buying a turkey breast rather than a whole turkey.
  • Recycle and re-use. Invest in a reusable holiday tree rather than buying a fresh-cut tree every year.
  • Favor your priorities. If you’d rather have big gifts than travel somewhere exotic, consider cutting back your travel budget.

Think about what really matters to you and your family during the holidays. These may be small savings, but they can add up.

By focusing on what matters to you and your family (instead of what your neighbors are doing or what you see on TV), you’ll get more value out of your purchases. You might even have enough left over to increase your emergency fund.

4. Save Ahead, Don’t Charge

Credit cards can be convenient, but they increase your expenses with fees and interest charges. A better way? Save a little throughout the year and use that to cover holiday expenses. You can even open a savings account specifically for holiday spending.

Here’s the most effective way to save for the holiday season:

  1. Figure out how much you want to save.
  2. Divide that amount by the number of months you plan to spend saving.

For instance, if you want a budget of $500 and you start saving in June, then you’ll need to save $84 per month.


Opening a separate savings account for each of your long-term goals can help you stay on track.

5. Make Saving Easy

Starting earlier will make saving easier. Consider that $500 budget — if you start saving in January instead of June, you’ll only need to save $42 per month. You’re much more likely to stick with saving if your per-month savings goals are manageable. And if you want to take it to the next level, set up an automatic transfer to your savings account.

Tips for Sticking to Your Holiday Budget

Planning a budget is one thing, but sometimes sticking to it is another. Here are a few strategies to keep your spending on track.

1. Spread Out Your Budget

It’s easy to associate your whole budget with gift shopping because gifts tend to take more of the spotlight. For example, if you walk into a store to shop for gifts thinking, “I have a holiday budget of $500,” you may spend more on gifts than you can afford.

But if you reckon your gift budget (which is only one component of your overall holiday budget) at just $250, then you’re much more likely to stop spending when you reach that amount.

So if you want to avoid overspending, make sure to divide up your budget across your spending categories before you hit the stores.

Make sure you track expenses as you shop. Logging expenses later is less effective and less accurate.

2. Track Your Purchases

The best way to stick to a budget is to track what you’re spending. Some ways to track holiday spending include:

  • Mobile banking apps
  • Holiday shopping apps
  • A small notebook and pen

Whatever method you choose, make sure you track expenses as you shop. Logging expenses later is less effective and less accurate.

When the holidays are over, keep your budget (including receipts) so you can refine it next year.


Don’t get phished — learn how to spot phony emails.

3. Comparison Shop and Buy Online

Instead of buying an item the first time you see it in a store, check online for better deals. Even small differences in price can add up!

Free online tools make it easy to comparison shop, track prices over time, and decide the best time to buy. Some apps will even send you notifications when items on your shopping list drop in price.

If you’re worried about shopping on the internet, take precautions to avoid online shopping fraud.

When the holidays are over, keep your budget and receipts from your purchases so you can refine it next year.

4. Use Cash

It may sound old fashioned, but watching a stack of bills dwindle as you shop can make you more aware of what you’re spending.

You can even take it a step further and divide your cash into envelopes. Label each envelope with a category in your budget like “Thanksgiving Dinner” or “Work Gift Exchange.” Take your envelope of cash with you when you shop for that expense and only spend from that envelope to prevent overspending in any category.

This method won’t work for online shopping, of course, but that can be a good thing if using cash in person makes you more likely to support local businesses.

credit card

Which rewards credit card is right for you?

5. Use Credit Card Reward Programs

Using rewards cards for holiday shopping can be a great way to earn cash back or sky miles. Here’s the smart way to maximize reward points at the holidays:

  1. Save money ahead of time to cover holiday costs.
  2. Pay with your credit card.
  3. Wait for your reward points to come in.
  4. Pay off your holiday expenses from your savings.

This way you can earn those rewards without paying for them in extra interest charges and fees. And remember: Never put more holiday expenses on your credit card than you can afford to pay down from savings.

The Takeaway

Creating a holiday budget may be the best gift you give yourself this year. It reduces the stress of the holidays, helps you spend wisely, and frees you to focus on all the things that bring you and your loved ones joy during this season.

Explore Credit Cards Options Through PenFed

Discover the diverse offering of products, services, and support available to our members.