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How to Budget for Christmas

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Ahhhh, Christmas. The most wonderful time of the year!

Annnnd, for some, the most stressful.

There are so many things to buy and make and bake and wrap and DO that it can be really overwhelming.

I, for one, do not have it in me to be overwhelmed at Christmas time. I love everything about the holiday season.

The Christmas music.

The Christmas tree.

The Christmas cards.

The Christmas gifts and Christmas shopping.

The Christmas spending… (OK, that part I don’t love, but since I have a solid plan, it doesn’t stress me out).

Since having children, I’ve realized just how fast the years go by. My goal is to soak up every second of the Christmas season and not stress over the finances.

Pinterest image for setting up a Christmas Budget.

*Post contains affiliate links.

A Christmas Budget is Essential

A Christmas budget is essential, and I’m not just talking about a gift budget. There are so many extra costs around the holidays, and the money has to come from somewhere!

Step 1: Christmas Budget Planning Begins in January

Yes, that’s right. As soon as the Christmas season is over, I start planning for next Christmas.

This way, everything is fresh in my mind and I can see areas that we accounted too little money for, as well as areas we had too much money (let’s be real, the later rarely happens).

January is when we set up our budget for the entire year. We decide what we are going to spend our extra money on.

Usually it’s travel or house expenses, so we decide where we want to go or what house project we will be working on next.

Picture of Christmas budget: calculator, pen, and budget.

As we set up our budget, we can see where there’s room to set aside money for Christmas expenses.

Unless you are extremely well off, it is crucial to start planning early. Waiting until December and then winging it is the worst thing you can do.

Step 2: Christmas Lists for Everything

Seriously, every little thing. This happens in January as well.

Wrapping paper. Christmas pajamas. Holiday baking. Gifts for coworkers, neighbors, teachers. Christmas cards. Christmas photo shoot. New clothes for Christmas Eve and Christmas parties. Polar Express or Nutcracker or whatever Christmassy activities you plan to do!

Assign each item a monetary value, even if you have to guess.

The hardest part is deciding how much money to spend on your family. I always spend a different amount each year, depending on what my children really want and what kind of deals I can find.

I will set a maximum budget for my children’s gifts and I won’t go over that, but sometimes I am way under!

Once you’ve figured out how much money you will be spending on Christmas, look at how much money you are putting aside.

It’s really smart to have a cushion in your Christmas budget in case you go over.

Picture of women holding a pen and making a Christmas list.

Step 3: Cut Out Things That Don’t Bring Joy

Now that you have your list, put it in order of priorities. I do not and will not do all the things because it takes away from experiencing joyful moments with my family.

If something doesn’t bring JOY (either to my family, or someone in need), we don’t do it. Bam, crossed off the list, done.

Do Christmas cards bring you joy? DO THEY REALLY? Because they don’t bring me joy.

Sure, I love receiving them, but I love seeing them on Facebook just as much.

Seriously. In this day and age of social media, cutting out Christmas cards if you’re on a budget (or in a season of busyness!) is totally acceptable.

We always buy a few regular Christmas cards and print out pictures of our family to give to older family members who aren’t on social media and who really appreciate it.


You can read my post “How to Make a Christmas Bucket List” to see which activities we cut out and which traditions we keep every year!


Here are some things you can cut out:

Matching Christmas Pajamas

Now, this is something that brings me JOY, so we buy matching pajamas and wear them the entire month of December (let’s be real, truly through at least May haha).

If you're looking for Christmas PJs, here are some of my faves!

Bear PJs
Let It Snow PJs
Christmas PJs
Moose PJs
Deer PJs
Bear PJs
Let It Snow PJs
Christmas PJs
Moose PJs
Deer PJs
Bear PJs
Let It Snow PJs
Christmas PJs
Moose PJs
Deer PJs

Christmas Parties

Attending or hosting Christmas parties costs money, let’s be real. You bring a hostess gift or a dish, and oftentimes a gift for a white elephant gift exchange. If you’re invited to multiple Christmas parties of people.

Wrapping Gifts

Wrapping paper, tape, ribbon, and labels can all add up.

I save gift bags every year and reuse them.

One year, I went with a black, white, and red theme.

I stocked up on old newspapers and got a roll of red ribbon from the dollar store. It was so pretty!

Now that I have a million (read: three going on four) children, I splurge and buy wrapping paper haha.

Charitable Giving

I personally think that giving back, especially at the Christmas season, is super important.

It’s a time where we focus so much on material things, that focusing on giving to others is a great reality check.

However, if you’re on a really tight budget, consider volunteering your time instead of your money.

Gifts for Children Only

In our family, once we have children, the adults stop exchanging gifts. It’s more fun to focus on the children, and we don’t really need anything anyways!

Family Gifts

Instead of buying an individual gift for your sister, her husband, and their three children, consider purchasing a family gift.

This could be something such as a few new board games and snacks for an epic game night, movies, art supplies, etc.

Little girl sitting under a Christmas tree reading a book.

Step 4: Find the Dollars

Now that you have set your budget and made your lists, it’s time to figure out just where that money is coming from. You can do this a few different ways.

Save Money Each Month in a Separate Bank Account

If your Christmas budget is $1500 for the year, and you decide to put aside money monthly, that is $125 per month, or $62.5 per pay period.

We did this method for many, many years, in combination with other methods. Some years, we put some money aside from a tax return, and put aside the rest each month.

Tax Return

Which brings me to my next point: tax return! We personally try NOT to get a tax return each year, but somehow can’t figure out the right balance of deductions, and always end up getting a return.

Consider setting some or all of that money into your Christmas budget.

Picture of woman's hands holding 9 hundred dollar bills.

Account Interest

I highly suggest opening up a bank account that has a high interest rate.

I really like using Ally Bank. You can open a high-interest savings account with them and earn currently 1.8 % interest. I make no money from telling you this, I just think it’s awesome!

You won’t make a TON of money in interest in a year, but every little bit counts, right? I currently have $5,000 in my account and make around $8.5 per month in interest. $8×12= 102.

That’s a decent amount of money for doing NOTHING! The money in that account doesn’t even have to be your Christmas budget, but you can put the money earned from interest into your budget.

Credit Card Points

We put everything on our credit card and pay it off, in full, every month. We basically treat our credit card as a debit card.

We bank with Chase and currently rotate between the Saphire, Freedom, and Southwest credit cards.

Currently, we’re rolling our points over into travel points, so I can’t give you an accurate picture of how much money we’re earning in points.

In the past, we have regularly earned $50 a month in points. You can let that money accumulate (OR transfer it to your Ally account!) and by the end of the year… $50×12= $600.

*This ONLY works if you pay your balance off IN FULL every month. If you are late, or don’t pay the entire amount, you will incur a late fee and negate the money you earned in points.

Christmas Bonus

If your company regularly gives you a Christmas bonus, and you know you can count on it, that is an excellent way to plan for your Christmas budget!

If you’re not sure that you will get one every year, it is best to not count on it. If you do get one, great! Consider putting it aside for the next year.

Trust me, you will be thankful you did.

Rakuten (previously E-bates)

If you’re not utilizing Rakuten, you definitely should be.

Simple buy the things you normally buy, but shop through the Rakuten site. So, find what you want on Amazon, sign into Rakuten, search their site, and purchase it.

You get a certain percentage back, and it is completely free to use.

You can click this link here to sign up, and get $10 for FREE (I will get a little cash back as well. Thanks in advance!)

Pinterest image of how to make extra money at Christmas.

Extra Pay Checks

Depending on your place of employment, you probably either have 24 or 26 pay periods per year.

At my husbands previous jobs, we had 24 pay periods.

However, with his most recent job, we have 26. We set our monthly budget so that we can live off of 2 paychecks, and twice a year, we get that money that isn’t accounted for.

When we set our annual budget in January, we always have a small idea of where those extra paychecks will go (when you own a 1890s colonial, there are always a million house projects waiting!).

We use the fall/winter paycheck for our Christmas budget (not the entire paycheck).

It also helps me stick to our budget, because usually the rest of that paycheck goes towards our travel funds, so if I go overboard on Christmas, we don’t get to travel as much!

Last year was the first year of having that extra pay period for our Christmas budget, and it eliminated so much stress of the Christmas season.

5. Adjust Your Budget as Needed

Just because you set your budget in January, doesn’t mean that you can’t change it up as you go.

Sometimes emergencies happen, and not everyone has an emergency fund. Maybe you had health expenses or an appliance die, and you need to use your Christmas money for those expenses.

That. Is. OK.

On our sons first Christmas, money was tight. He was 11 months old and didn’t ‘need’ anything, but I wanted him to experience the magic of Christmas!

So, we totally wrapped up toys that he already had, but hadn’t played with in awhile.

He didn’t notice, and was totally thrilled with everything. It was a magical day, and we spent maaaaybe $10 total on presents for him.

Cut Back Even More

If you are in this season, it is OK to cut back even more. It’s best to do it at the beginning of the holiday season so that you have time to adjust to the idea of a different plan.

Check out consignment stores or Facebook marketplace for previously owned toys. We purchased a train table from Facebook, and it is a really nice one that they don’t make anymore. It is hands down the number one most played with toy that we own!

Consider buying generic instead of name brands. I am sure this gets harder when your children get older. My oldest is only 5, and he doesn’t care about brands at all.

It’s OK to tell relatives that it’s been a tough year and you aren’t able to exchange gifts. I don’t care about gifts from my family members as much as I care about spending time with them!

It’s OK if instead of a fancy teacher gift, you and your child simply write a handwritten note.

Nobody wants you to go into debt or be stressed out about finances in order to get them a gift!

P.S. Make sure you’re following me on social media to keep up with our family and all the twin cuteness! I am on Instagram, Facebook, and Pinterest!

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