How to make a holiday budget and stick to it in 7 easy steps

’Tis the season! It’s an exciting time of year filled with reasons to celebrate. But while the holidays can be wildly festive, they can also be wildly expensive with the cost of gifts, decorating and more.

If money is tight this year, you might want to scale back your holiday spending. You could start by combining a realistic budget, helpful financial tools and smart strategies for saving money. If you do, you could still have a great holiday—and maybe even start the new year in a better financial position.

Key takeaways

• Creating a budget early in the season could help you be more intentional about your holiday shopping. 
• Organizing your budget under major categories like gifts and travel could make it easier to keep up with planned purchases and their costs.
• Shopping smarter may help. You could comparison shop with an easy online search or limit your shopping to major events designed to maximize savings, like Black Friday and Cyber Monday.
• Adding other tools and strategies—everything from using apps that track your spending to using a credit card that gives you cash back on every purchase—may help too.

Ready to strategize your holiday shopping? Creating a budget early on can be a great way to start. That’s because a budget can help you be intentional about what you buy—and what you don’t buy—during the season.

It can also give you more time to plan your purchases with savings in mind, which means less risk of going into debt. You’ll also have less stress around gift buying and holiday activities, so you might even enjoy the season more.

Another simple way to stay within your budget is to take stock of what you already have. There may be things hiding in storage spaces like closets, the attic or the basement that could reduce your holiday spending.

Older decorations you may have forgotten about could fall into this category. So could clothing that’s suddenly caught your eye again. Unopened packages you meant to gift—or regift—in years past might also qualify.

Budgets, like many things in life, can benefit from a healthy perspective and a willingness to adjust expectations. So if money is tight this year, be open to the idea of making some changes to the way you celebrate.

For example, you could have an honest talk with family and friends about holiday spending and maybe agree on a spending limit.

You could also consider shifting to budget-friendly traditions. With a little imagination, the options could be numerous, including driving around in the evening to look at holiday lights, attending a holiday parade or baking together as a family.

Wondering how to make a holiday budget? Start by creating a list for your holiday shopping to help you more easily track your expenses. You can organize your list by major expense categories—gifts and travel, for example—and then itemize your expected expenses under each.

Here are some major holiday spending categories to consider adding to your list:

If you’re like most people, gifts are one of your major holiday expenses. That’s why a gifts category should probably be at the top of your list.

Under that heading, you could list all the people you’d like to buy for. Then add the gifts you’d like to give them and attach an estimated cost for each. Be sure to include things like the cost of wrapping supplies and shipping.

Keep in mind that while creating a list and sticking to it can be a challenge, there can be a definite upside: It could help you resist the temptation to overspend when holiday sales kick in. So make your list and check it twice! In fact, checking it multiple times can help you stay on track.

With a little commitment, it’s possible to make the holidays magical on a budget with the gifts you choose. And if you need more ideas for affordable gifts, you could check out this holiday gift guide.

There are so many great things to do during the holidays, and it’s tempting to try to do them all. So be sure to add a food and entertainment category to your list to help you stay in control of your expenses.

Your entertainment-related costs might include things like holiday plays and shows, concerts featuring songs of the season, and related expenses like holiday photos of the kids. 

Food-related expenses could include ingredients for the holiday cookies you bake every year or the dish you bring to the office holiday party. You could also add the cost for everything you need to prepare a special meal for family and friends. For ideas, inspiration and ways to economize, check out how to host a holiday dinner on a budget.

Decking the halls can be one of the best parts of the holidays. But the costs of adding holiday cheer to your space can add up quickly, so create a decorations category for your list and itemize expenditures under it.

You could incorporate things like an arrangement for your mantelpiece, string lights for indoors and outdoors, and wreaths and other fresh greenery. Your list might also include items used to observe spiritual traditions associated with certain holidays—a menorah, for example.

Dressing up during the holidays is fun—but it can also be costly. So be sure to add a holiday attire category to your list.

Items under this heading might include a special dress for a holiday dinner at your favorite restaurant and outfits for the kids when they visit grandma and grandpa. As with gifts and decorating, doing a bit of attire preplanning could help you adhere to your budget.

Depending on your situation, you might also need to add a travel category to your list. If you’ve moved away from your hometown and plan to go home for the holidays, for example, there will be travel costs. Or maybe you’ve thought about treating yourself to a stress-free holiday getaway to a place that’s new to you.

In any case, there are strategies for traveling on a budget if that’s your goal. You could take a road trip instead of flying, for example. Or book flights well in advance, which can sometimes result in savings.

You might also consider getting a travel rewards credit card so you can earn rewards for your purchases in the form of points or miles.

As part of your efforts to economize, you could set spending limits on your holiday shopping. You could start by taking these steps:

1. Figure out how much you’ll need for your regular monthly expenses. Take stock of your monthly expenses and how much money you’ll need to cover them. 
2. Add up what you expect to spend over the holidays. Reviewing your holiday spending from last year can give you a realistic idea of what this year’s costs might be.
3. Set a holiday spending limit. Once you’ve identified your business-as-usual expenses and last year’s holiday expenses, you can set a holiday spending limit that reflects your current financial position. You may have more—or less—money to spend this year, but at least you’ll have set some realistic boundaries for your expenditures.

If you’re not sure how to create a budget, don’t worry. There are lots of ways to go about it. You could check out popular budgeting methods for personal finances, including the 50-30-20 method, the envelope system and the zero-based method. The Consumer Financial Protection Bureau also has a budgeting worksheet that might help you get started. 

Looking for ways to shop smarter can be a good idea all year long—and especially during the holidays. Here are some ideas for getting the most for your money.

You can use the speed and reach of the internet to help you save money by shopping online. That could mean doing things like checking a variety of websites for the best deal on a special gift. You could also apply online coupon codes when making an online purchase to help reduce the price of an item.

Comparison shopping is a relatively easy way to save money on your purchases. You can do that in store with a simple side-by-side price comparison of similar items from different brands. You could also use a price comparison app or do a Google search to find a lower price on a given item relatively quickly.

One benefit of shopping this time of year: there are major shopping events designed to help retailers make sales—and consumers save money. 

You’ll want to avoid impulsive shopping sprees during the holidays, of course. But it can help to shop strategically during events like Black Friday on the day after the U.S. Thanksgiving holiday. And don’t forget Cyber Monday, which falls on the Monday after Thanksgiving.

One major benefit of layaway is that it can give you flexibility in how you approach your holiday budgeting. And while it isn’t as popular as it once was, the good news is that it’s still often available. 

Layaway involves making a down payment on a purchase—often a large purchase—and paying for it in installments. The retailer holds the merchandise until you pay the balance in full.

The right credit card might be another option for managing your holiday purchases without breaking your budget. For example, you might consider applying for a card with a low introductory rate. You could start by using it to make your holiday purchases and then continue using it as part of an ongoing plan to build, improve or maintain good credit.

A cash back credit card may also be worth considering. These cards let you earn cash back for everyday purchases like groceries, gas and dining. And that could mean more money back in your pocket while you’re trying to complete your holiday shopping.

Learn more about the benefits of using credit cards when it comes to earning rewards, building credit, managing finances and more.

You might want to track your holiday shopping to help avoid going over budget. For example, you could use an on-the-go banking app like the Capital One Mobile app. It can help you view your transactions in real time, redeem credit card rewards and more.

You could also check out digital money management tools, which can make it simpler than ever to manage your money anytime, anywhere.

To help responsibly manage your overall credit situation, you might think about CreditWise from Capital One. You can access CreditWise from your desktop or your phone, so you have it at your fingertips. Using CreditWise to keep an eye on your credit won’t hurt your score. And it’s free for everyone, even if you’re not a Capital One cardholder.

As you head into the excitement of the season, take a deep breath and make a plan. Remember, the holidays can still be enjoyable when they’re low key—maybe even more so.

To get started, you could create a realistic budget. Find a digital tool to track your spending. Limit your shopping to major events like Black Friday and Cyber Monday to help maximize savings.

You could also consider a credit card that lets you earn cash back on every purchase—or one with a low intro rate. Take some time to compare Capital One credit cards to find the one that’s a good fit for you. Then, with your budget and spending plan firmly in place, you can kick back, relax and make merry!