Budget Before You Shop This Christmas and Save

Like it or not, Christmas is less than two months away; it’s a good time to budget for and begin your gift shopping.  Going Christmas gift shopping without a plan and a budget can be an unnecessarily expensive endeavor.  The last thing you want is to still be paying off Christmas bills in April.  Don’t even think about setting foot in the mall without a plan.

The Wrong Way to Budget for Christmas

I used to have the concept of the Christmas budget all wrong; many people will do what I used to do, but this is the wrong way to go about it.  In past years, I would determine how much I was going to spend on each person, then add those amounts together to get my total Christmas shopping spend amount.  Here’s a quick example:

  •     Mom – $50
  •     Dad – $50
  •   Budger for Christmas  Grab Bag – $40
  •     Coworkers – $50
  •     Son – $200
  •     Daughter – $200
  •     Girlfriend – $150
  •     Niece 1 – $25
  •     Niece 2 – $25
  •     Nephew – $25
  •     Godson – $25
  •     Goddaughter – $25

Total Christmas Budget:  $865

This is the wrong way to setup a Christmas budget.  Why?  Unlike a standard household budget, you do not have to spend this money.  Remember, you are buying gifts, not heating you home.  Gifts are a nice thing to give (and receive), but they are not essentially necessary.  You shouldn’t be a total scrooge and skip out on gifts altogether, but you should be both flexible and creative when it comes to buying Christmas gifts and your shopping budget.

When you budget in this way, you are not taking into account what you can really afford to spend. You are, in effect, placing demands or requirements on your income or savings.  It puts you in the position of saying, “this is how much money I need to pay for Christmas gifts.”  That’s not right.  That mindset will make you far more likely to use credit cards or spend what you cannot afford to spend.  You want to be asking, “How much can I afford to spend on Christmas gifts?”

The Right Way to Budget for Christmas – Determine Your Total Spend First

To setup your Christmas shopping budget the right way, start with the total amount you’ve determined you can afford to spend.  For example, I have determined that after paying my bills, I will have $440 left.  Additionally, I have $200 available in short-term savings for gifts.  My total Christmas budget is $640.  I can comfortably afford to spend $640 on Christmas gifts this year.  Here’s the updated budget based on what I can really afford to spend:

Total Christmas Budget:  $640

  •     Mom – $40
  •     Dad – $40
  • Saving money with a Christmas budget    Grab Bag – $30
  •     Coworkers – $40
  •     Son – $140
  •     Daughter – $140
  •     Girlfriend – $120
  •     Niece 1 – $20
  •     Niece 2 – $20
  •     Nephew – $20
  •     Godson – $15
  •     Goddaughter – $15

Be Flexible With Your Christmas Shopping Budget

As you can see from the example budgets I’ve provided above, Budget 2 is $225 less than Budget 1.  Realistically, I can afford Budget 2, but I would like to get gifts that are closer in value to the spends indicated in Budget 1.  Here is where you need to be creative.

Let’s say I found a great deal and picked up my nephew’s gift (normally $25) for half-price ($12.50).  Based on my budget, I intended to spend $20 on my nephew’s gift.  My spend of $12.50 is $7.50 below my budgeted amount.  I will now boost up my girlfriend’s gift spend amount with the savings; her new spend amount will now be $127.50.  Gifts have a perceived value tied to them, you don’t necessarily have to spend the full amount you have budgeted for each person on your list.  If it’s generally accepted that my nephew’s gift is in the $20+ range, then I certainly don’t have to spend the money I saved on the deal getting something to make up the difference.
Wrap It Up

Adjust your budget as you see fit.  The key is that you stay at or below what you can afford to spend.  You should never go into debt to buy Christmas gifts.  Spend what you can afford to, and stay within the limits of your budget. Always have your budget in place before you start your Christmas shopping.  Now go out there and stimulate the economy…