How to Save For Christmas

Christmas happens at the same time every year, yet it always seems to catch people by surprise. Especially when it comes to their finances.

So many people struggle all year to stay within a reasonable budget. They enter December thinking “if I can just keep my costs down this month…”

But you probably know how that goes.

There are gifts to buy. There’s family to see. There’s lots of treats and feasts and eating out.

Christmas can burn a hole in your pockets if you aren’t careful.

So what should you do about Christmas?

Here are some thoughts on how to handle the holiday.

Calculate How Much Christmas Costs

It’s important to know in advance, how much do you realistically spend at Christmas time?

There are a couple of ways to calculate this.

One is to go back and look at your credit cards and bank statements from last year and add up every transaction that you know was directly related to Christmas. The tree. The gifts. Etc.

Another approach is to see how much more expensive December is than the average month.

I use a free tool called Personal Capital to manage my money. It lets me track my spending, but it also lets me filter to custom time periods. So I can look at my spending from January – November of last year. It will show me the total and the monthly average. Then I can filter to December of last year and compare.

By the way, I just did this and it looks like last year December was $250 more than the average month. Your mileage may vary.

Of course, maybe you got started shopping for presents early and some of your transactions happened in November. That’s fine. Compare the average on January to October to the average of November – December. You’ll have to multiply the result by two, since you have two months of elevated spending for Christmas. The advantage of this approach is that you capture both holidays (Christmas and Thanksgiving).

Set a Budget

I’m not sure how you feel about the word “budget.” To be honest, I don’t really care for it. It seems stifling. Boring. Oppressive.

But it’s a useful concept.

Let’s face it, if you have all the money in the world and don’t need to worry about controlling your spending, why are you reading a post about how to save for Christmas? Why are you reading a personal finance blog at all?

You can use your calculation from the last step as a realistic starting point. Maybe you know you’re going to spend a little more this year than last year so you set the bar higher. Maybe you want to cut back so you set it lower. Those are both okay. There’s a lot of “personal” in personal finance.

Once you know how much you plan on spending, you need to save up the money.

Save For Christmas Every Month

Christmas happens in December but it’s a monthly expense.

This is why people get into trouble with their finances. They get paid in roughly even amounts throughout the year, but spending is uneven. If you spend everything you earn most months, you won’t have a surplus saved up for the month where spending naturally rises.

So take your Christmas budget and divide it by 12 (or however many months are left until Christmas). That’s how much money you need to save for Christmas every month.

The best way to do this is to create a separate savings account at your bank. Or, if your bank lets you, you can create a sub-savings account within your existing savings account. Clearly label this bucket “Christmas” and schedule automated monthly transfers from your checking account.

In December, take out all the money to cover your holiday spending.

Other Ways to “Save” For Christmas

But what if you’re too late this year? What if Christmas is upon you and there’s no time to save any money. What if money is so tight that you didn’t have much to save anyway?

Let’s consider a few creative ways that you could make Christmas work without a boring budget. Some of these methods might sound terrible to you, and some might actually work. Again, there’s a lot of “personal” in personal finance.

Sell You Stuff

Let’s face it, you have too much stuff already.

Chances are, your “stuff” has become unsightly clutter in your home. It requires cleaning. It requires storing. You don’t use most of it anymore.

But you know what they say, one man’s trash is another man’s treasure.

Clean up some stuff that you don’t use anymore. Take good pictures. Place it for sale on Craigslist or Facebook Marketplace or whatever corner of the internet you prefer to do business on.

The advantage of this approach is that you’ll be prepared in advanced for the mountain of gifts that might be entering your life. One of the reasons why your home is so cluttered in the first place is that there’s too much stuff going in, and not enough going out.

It might seem like this strategy can only work once. Unfortunately, you’ll probably mindlessly accumulate more junk over the course of this upcoming year and you’ll be able to do it next December as well.

Earn Some Extra Money on the Side

You always have two options: Save money, or make money. Cut back on expenses, or earn more income.

You can do this with a traditional second job, or you can try your luck landing something a bit more unusual. Offer English lessons online. Tutor students in a subject you know well. Find a freelance client who will pay you for your writing.

Just make sure that if you’re on a tight time frame, you do something where you can get paid quickly. A gig where you make cash under the table puts money in your pocket much quicker than a traditional job where you have to wait for the pay period to end and then checks are issued the next Friday.

Choose to Not Exchange Gifts

One way to make Christmas cheaper is to find someone you usually exchange gifts with and ask them if they would be okay skipping it this year.

This might work out for you both, since chances are the other person is just as stressed about all the gifts they “have” to buy as you are.

Since we’ve had kids, there have been several years where my wife and I have agreed not to buy each other anything.

Final Thoughts

However you choose to save for Christmas, remember that it is a monthly expense. You know when it’s coming up. You can generate a good estimate of how much it usually costs. There’s no reason to be caught off guard every December. You have everything you need to make Christmas go smoothly next year.

Whatever time you’re reading this, Merry Christmas!

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