I’ll admit it. I love giving presents. From pets to parents, friends to kids, I relish watching someone I love open a present I picked out especially for them. My wallet, however, isn't quite so fond of my annual holiday shopping sprees. This year, I am resolving not to spend the first quarter of next year paying off the last quarter of this year. If you can relate, I hope these tips from experts will help you plan out your holiday budget too.

Holiday spending statistics 

So how much do you "typically" spend during the holiday season? Do you know? Personally, I have no idea how much I spent on gifts last year. I even gave myself a budget. But without any other tools to help me stick to it, that budget was quickly forgotten as I happily shopped and shopped.

According to Investopedia, the average American will spend $854 on holiday gifts (as of 2012). If you have kids, the estimate is that you will spend $271 per child on holiday gifts. If this sounds like more than your budget can comfortably accommodate, you are not alone—experts call Americans' tendency to overspend now and regret it later the "holiday spending hangover." 

Help! I need a holiday budget! 

Figuring out how much you can afford to spend during the holidays is an exercise best completed before the holidays arrive. But it can be tougher than it seems to budget for what basically amounts to optional spending!

In this situation, knowing what experts recommend can be a useful guide. Financial advisors state you should plan to spend no more than 1.5% of your annual income during the holiday season.


  • Your annual income: $50,000
  • Multiply $50,000 by 0.015
  • Your holiday spending budget: $750 or less

Of course, if you are planning to travel or make an annual charitable contribution, such a simple formula may not be sufficient. If this describes you, this useful holiday budgeting worksheet can help you prepare for a variety of holiday spending activities.

5 Tips to spend less and get more 

Once you have a basic sense of your holiday spending budget, it’s time to dig in where you really shine—in finding creative ways to save while you shop! These tips can help.

1. Keep a worksheet to track your holiday spending.

If you used the holiday budget worksheet here, you already have a sense of where each dollar of your holiday budget is going. If you used the simple calculation, you may be thinking (as I often do), "Woohoo! $750 to spend! Fun!" This can quickly become a slippery slope without basic budget tracking measures in place.

  • What to do: Keep a spending log. Write your total budget ($750 in our example) at the top. Each time you make a holiday purchase, deduct that from your total and write the new total in below.


  • You’ve decided you have $750 to spend.
  • You buy a gift for your mom for $75.
  • In your log, write -$75.
  • Then note what remains: $675.

2. Shop using a list.

Nothing is worse than going grocery shopping without a list—especially when you’re hungry! In the same way, doing your holiday shopping without a list (and especially at the last minute) is a recipe for financial ruin. Experts recommend the opposite strategy: make a list and shop from that list, finding the best prices before you buy.

  • What to do: First, write down the name of everyone you want to buy for this year. Next, brainstorm gifts you think they might enjoy. Now, go to work figuring out how to get the lowest prices and best deals on those items.

3. Shop with cash only.

If you plan to shop in brick-and-mortar stores, you can use the Dave Ramsey "cash in the envelope" system to keep to a strict budget. When the envelope is empty, your shopping is over!

  • What to do: Even if you plan to shop online, you can still use this system—just fill the envelope with "cash" (even play money works) and take money out every time you make an online purchase. When there’s no more "money" in your envelope, shopping is over.

4. Start your shopping before you start feeling festive.

Bankrate experts recommend beginning your holiday shopping as early as October 1. The best period to shop for holiday gifts, according to Bankrate, is October 1 – December 1. The closer you get to the holidays, the more a) panicked, b) generous, c) reactive holiday spending becomes. So do your spending before the "holiday spirit" hits in earnest.

  • What to do: Create your holiday spending budget as early as October. Get all your tools ready—your lists, your tracking log and anything else you need. Try to "time box" your shopping during limited free moments (like on your lunch hour) so you aren't tempted to linger online or in stores and spend extra. If someone who is not on your list buys you a present, think of another way to say thank you (a sweet card, home-baked treats) other than simply buying a gift you didn't budget for.

5. Just say no to holiday "special offers."

If you are brave enough to venture out to stores or online stores after December 1st, be prepared to get pounced on. Retailers will be primed and ready with special offers like "skip a payment," "don't pay any interest for a year," "get this freebie if you open a new line of credit," and other tempting incentives.

  • What to do: Walk away. Don't even consider these offers. Go back to #3—is there cash (or "cash") in your envelope? Spend that—don't defer payment. If there is no cash left, then your holiday spending is over for this year.
How to Create a Holiday Gift Budget Now