Holiday Budgeting: How to Plan for Every Expense This Season

Ah, the holidays. While it can be a time of good cheer and merriment, our bank account can tell a tale of woe. Overspending and holiday debt hangover are two financial perils to be watchful of. Add to that economic uncertainty, a higher cost of living, and tariff concerns, many folks this holiday season have lighter budgets.

Per a recent survey, Americans plan to spend an average of $1,552 per person during the holidays, which is a 5% drop in spend from 2024– the first noteworthy drop since 2020. To break it down even further, it represents an 11% drop in the average spend on gifts.

To have an enjoyable holiday season you don’t need to go into Scrooge mode and say "no" to every gift exchange and family gathering until the new year. There is a way to strike a balance and steer clear of the overwhelm. Here, we'll guide you on how to create a realistic holiday budget.

Building Your Holiday Budget

To help you avoid being overwhelmed for the holidays, you can lay the financial groundwork and do a bit of planning. To start, take a good look at your current money situation.

This includes:

-Cash flow: How much money is going in and how much is going out each month. It's a good idea to note when you get paid and your different sources. If you do gig work or freelance, jot down how much you set aside for taxes each paycheck.
-Savings: Whether you have existing savings you can tap into holiday-related expenses. This might be a separate splurge, gift, or holiday spending fund. Or it might be a general savings account, or a splurge fund that doesn't go toward a specific financial goal.

• Existing budget: Take a look at your current budget. This is a good opportunity to see if you can cut back in any area to have enough for the holidays.
• Cut back on expenses: If you haven't saved as much as you anticipated–it can happen to the best of us–consider scaling back on certain expenses, even for a few months. For instance, put a pause on a gym membership or streaming service subscription you don't use very often. Or cut back on eating out until the holidays roll around. That will net you savings that you can put toward your end-of-year-expenses.

Create a Budget That Keeps Holiday Spending on Track

Now, for the fun part. When you create a holiday budget, and take note of every single expense that could possibly turn up, you won't get blindsided by, say, spendy restaurant bills or that last-minute festive outfit you need to dole out cash for. Having a budget in place can help you keep your spending on track.

Here are items your holiday expense checklist can include:

• Outfits for parties and gatherings
• Gifts (note the giftee, ideas for presents, and the amount you want to spend)
• Cards and gift wrap
• Holiday decorations and lights
• Holiday-related travel
• Food costs, if you plan on hosting any gatherings
• Eating out for holiday meetups with friends, family and coworkers
• Special outings
• Entertaining any out-of-town guests
• Additional days you want to take off work that isn't covered by PTO, holiday pay or vacation time
• Higher utility bills (for holiday light displays)
• Childcare
• Rideshare expenses
• Pet sitting or pet boarding fees
• Charity donations

Stay on Top of Your Holiday Spending

Now that you have a holiday spending in place, you'll want to keep a close eye on your dollars. The beauty of it is that there are several ways you can go about it:

Budgeting app. Use a money management app where you can set a spending limit for just your holiday expenses. A handful of budgeting apps even feature the option to create a separate account for your holiday-related expenses.

When you're making purchases either from a linked checking account or card, you can track each one with something along the lines of "holiday spending." That way, you can tally how much you're spending respectively, and make tweaks along the way.

Budgeting apps can also pull data from your transaction history to create visualizations of your spending. For instance, a pie chart, or month-by-month spending.

Spreadsheets. If you enjoy using spreadsheets, this can also help you stay organized and give you a birds'-eye glance at your holiday spending. Consider creating different tabs for "gifts" and "travel." This is a great way to do a line-by-line spreadsheet.

Pen and paper. Sometimes old fashioned pen to paper is the way to go. This has a tangibility to it, and you can even add a bit of flair and fun by decorating your "budgeting journal."

To get started, create a few columns and label each column with the expense category, amount, and any notes you have. Consider getting creative and adding simple drawings to track expenses or map out goals. For example, a bunch of boxes that each represent $10 you've saved toward your holiday expenses.

While a budgeting app can make it easy to create a spending plan, categorize your spending and keep track of your cash flow, sometimes you might prefer to keep track of your holiday expenses with a pen and paper. You can create a few columns and label each column the following: expense, amount, and any notes you might have.

Simple Ways to Stretch Your Holiday Budget

Even with a budget in place, you might feel stressed out. This is no reason to pull your hair out. There are ways you can curb how much you dole out this year.

Set a spending limit. Once you've noted all your holiday expenses, factor in increases in costs thanks to tariffs and the higher cost of living.
Make trade offs to boost your budget. If you don't have as much set aside for the holidays, cut back on a few areas. For instance, on clothing or on going out to eat. Remember: Whatever areas you save can go straight into your holiday spending account.

Buy smaller versions. If you're the resident stocking-stuffer filler for your family, you can buy smaller versions of that fragrance or spirits. That way, your giftee can get the same enjoyment for a fraction of the price.

Switch brands. Another way you can save is to switch to a less-expensive brand or shop at a discount retailer for, say, all your holiday party or food needs.

Redeem retailer loyalty points and credit card rewards. Another way to save is to cash in on popular shopping extensions and apps. You can use them toward travel, statement credit, or gift cards for restaurants or holiday expenses.

However, note the trade-offs of using shopping platforms. Rakuten collects a lot of data about you, your shopping and browsing habits to offer you deals. You'll want to be aware of the trade-offs before you install the shopping browser or app.

While credit card points can come in handy, be aware of not racking up a high balance on your card just so you can collect points. Doing so will only dig a deep hole that you'll need to claw your way out of later.

Do experiential gifts. Instead of tangible gifts, consider an experiential present that you can give to someone later in the year. You can gift the person on your list an "IOU" coupon for a daylong excursion or dinner at your favorite restaurant.

Host a White Elephant. Instead of purchasing individual gifts for everyone, host a White Elephant exchange. Not only does it whittle down your giftees list, it'll up the fun.

Host a potluck. Ask participants to contribute a dish or drink to share. Add some fun by playing games, engaging in a craft activity, or host a little bake-off.

Plan a holiday movie fest. This is a low-cost way to enjoy one another's company for a fraction of the cost. Have your friends and family bring some yummy snacks to share and pick your favorite holiday movies to watch.

Stock up on clearance items after the holidays. Did you have your eye on that holiday lawn deer ornament? You can usually scoop up clearance items the week after Christmas.

The Time to Budget for Holidays Is Now

To avoid last-minute financial stress, start planning and saving for next year's holiday season early. See where you can cut back on your spending to make room for your holiday budget.

And if you can, spread out your spending throughout the year. That way, you can scoop up presents for those on your list without busting the bank.

Consider opening a savings account that's dedicated just for the holidays. Then, set a little aside throughout the year. For example, put $20 every other week on these expenses. In a year's time, you have $520 squirreled away. Bump up that amount to $30 every other week, and you'll find yourself with $780 for end-of-year expenses.

Say Goodbye to Holiday Stress

Yes, you can certainly find balance in your holidays this year. To do so, you'll need to plan carefully and create a clear budget as early as possible. Plus, find ways to cut back. It might require a bit of planning and out-of-the-box thinking.
With the right approach, you can enjoy the fun, festivities, and merriment of this time of year–and lean into your values and what's most important to you.

Frequently Asked Questions (FAQs)

How much does the average American spend on holiday items?
The amount can change each year, but per a PwC survey, it was estimated that Americans will spend an estimated $1,552 on holiday gifts.

What holiday do people spend the most money on?
According to 2024 data, people typically spend the most money during the Winter Holidays.$1,552

How much does the average family spend on each child for Christmas?
It depends, but on average in 2024, 19% of people planned to spend at least $200 per child for the holidays.

About the author

A personal finance writer for over 8 years, Jackie Lam covers money management, lending, insurance, investing, and banking, and personal stories. An AFC® accredited financial coach, she is passionate about helping freelance creatives design money systems on irregular income, gain greater awareness of their money narratives, and overcome mental and emotional blocks.

Her work has appeared in publications such as Bankrate, Time's NextAdvisor, CNET, Forbes, Salon.com, and BuzzFeed. She is the 2022 recipient of Money Management International's Financial Literacy and Education in Communities (FLEC) Award, and a two-time Plutus Awards nominee for Best Freelancer in Personal Finance Media. She lives in Los Angeles where she spends her free time swimming, drumming, and daydreaming about stickers.

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