Holiday Savings Guide Silver Christmas Ornament Written by: Jennifer Pieson, FPQP™

December is a great time to begin saving for the holidays – next year’s holidays! I suggest keeping track of this year’s holiday spending to prepare next year’s budget.

As many of our readers surely know by now, I love budgeting. I enjoy the precision involved, the act of categorizing, and the control a working budget allows me to feel. The best thing about a budget, though, my very favorite part, is the way a budget removes stress from the act of spending.

Before I was good at budgeting, I would hear the cha-ching of a cash register in my mind whenever I considered an expense, and then came the guilt and indecision. Now that I direct my cash flow specifically, I spend with confidence because I feel prepared. Having a budget means being thoughtful about your purchases, aligning your savings with your goals (both short and long-term), and ensuring that the cash is there when you need it.



Holiday Saving Guide Step 1: Estimate Your Need

A good budget takes many eventualities into account – you don’t want to be in the middle of your holiday shopping and realize you’re out of money. As a rule of thumb, I estimate what I think I’ll need for a specific goal, then I increase that estimate by half. (Seriously, this works almost every time!) If we plan a weekend away and I think “We’ll probably need a thousand dollars, all-in,” I save $1,500 and I end up happily surprised when the trip only costs $1,400. There are always random expenses that come up, and a good budget takes this into account. In addition, having a buffer helps you avoid “nickel and diming” purchases while you’re supposed to be having a good time.

The first step in creating a holiday budget is to estimate what you think you’ll need, then multiply that estimate by 1.5. Begin getting used to the idea of saving 1/12 of that higher amount every month.



Holiday Saving Guide Step 2: Get More Specific

Yes, December is the right time to begin planning for next year, but first you must know exactly what you’re saving for. Remember that estimate you made in the paragraph above? Now it’s time to get specific. Sure, you thought of buying for your own family members and close friends. But did you think of your postal worker? Your garbage collector? Your child’s teacher? Do you send Christmas cards? Host a party? This is where the “multiply that estimate by 1.5” part comes in.



Holiday Saving Guide Step 3: Make a List

Whenever you think of a holiday-related expense, add it to your list and assign an estimated dollar amount, with the goal of combining all these items into one big budget. You’ll need an easily accessible place to store this list – I suggest using your phone. You’ll always know where to find it, it’s always nearby, and if you name it something boring, like “Utility Bills,” your kids won’t bother to snoop.

Throughout the month of December, revisit your list often. Make notes about all the one-off expenses that come up around the holidays. Real-life experience is the biggest measure of a budget’s success, so live your life doing the regular holiday things you enjoy – and make a note of every expense you face so you’re prepared to pay for it again next year.



Holiday Saving Guide Step 4: Check it Twice

Here are some items that might not have made it to your original estimate, but as the month goes by you may find they apply to you.

  • Christmas Tree
  • Pictures with Santa
  • Wrapping Paper
  • Dinner with Friends
  • New Holiday Clothing
  • Any Holiday Travel
  • Tips for Retail Workers
  • Decorations

In addition to making sure you recorded all your expenses, consider how specific categories may fluctuate from year to year. My husband and I have always mailed Christmas cards, but before we had children we bought a couple boxes of cards and stamps, maybe $50 total. Now that we have kids we typically take a formal photo and have cards printed, (plus, postage is more expensive) so the cards portion of our budget has gone from ~$50 to ~$200! If I hadn’t increased our budget, that extra $150 would encroach on our regular monthly expenses in December.



Holiday Saving Guide Step 5: Start Saving

Once the new year rolls around, you should have a good idea of your entire holiday budget. Divide this number by the twelve months of the year and start saving monthly in an earmarked account.



Holiday Saving Guide Step 6: Enjoy Your Money

Spend with confidence! Keep your budget working for you by revisiting it occasionally to make sure it still matches your current needs. Raise or lower your monthly savings a bit to keep your budget aligned with your objectives. Budgeting helps you stay ahead and stay in control.

Please contact us with questions about how to start on your own holiday savings account. We hope you have a safe and healthy holiday!

And if you’re interested in reading more about budgeting, please see my blog post, Personal Budgeting Targets for Everyone.