Money·4 min read

How to Make a Holiday Budget

Women exchange gifts in front of a festive background
Design: theSkimm | Photo: iStock
October 5, 2022

The most wonderful time of the year is also the most expensive. And everything — from gifts to groceries for that special-occasion meal — is getting pricier (hi, inflation). Your move: Make a spending plan ASAP.

I’m not sure I’m ready.

Let’s check in. If you’ve been setting aside money throughout the year in a sinking fund, we’re impressed. See what you have so far and figure out how much more you can bank between now and when you need it. Split it up so you're saving some money from each paycheck.

If you’re starting from scratch, look up last year’s bank and credit card statements for an idea of what you spent in 2021. That might not get you quite as far this year, but consider it your starting point. One rule of thumb is to spend a max of 1.5% of your income on holiday expenses.

I’m not panicking, you’re panicking.

There’s no shame in dialing it back if you need to. Because reminder: 2022 has been a tough year.

Your next move is to write out a list of everything you think you’ll pay for this holiday season and the associated costs. Think: gifts, wrapping paper, shipping fees, gas or plane tickets if you’re traveling (and maybe travel insurance), ingredients for special recipes, decorations, etc. Don’t forget charitable donations or tips if you’re planning to give. Check it twice, and see if the total matches up to your ballpark budget.

What if it’s not quite there?

Start trimming your regular budget to make up for the extra costs. Then try a few of these tips to save even more.

  • Rethink your gifting traditions. A lot of people’s finances have been impacted over the past couple of years. Consider a white elephant or Secret Santa exchange to pare down the number of people on your list.

  • Don’t discount small savings. DIY your cards, reuse old gift bags, or turn old newspapers into wrapping paper. It’s what’s inside that counts.

  • Look around for deals. Do this ASAP. Some holiday sales have already dropped, and they probably won't last long. Opt into emails that share upcoming sales, set price trackers, and use browser plugins like Honey or Slick Deals that scan the Internet for coupons so you get gifts at the lowest price.

  • Book travel strategically. If you’re going out of town over the holidays, take a serious look at your travel budget. According to Hopper, a fare-tracker, airfare is expected to sit at a five year high this holiday season.Book flights ASAP to save $$$.

  • Get a seasonal side hustle. Stores and delivery services need extra help at the end of the year. If you’d rather do extra work from home, there are gigs you can do on the couch.

  • Keep checking in. Revisit your holiday budget regularly over the next couple months. It’s okay to spend more or less in one category than you planned – as long as you adjust elsewhere to stay within your overall spending limit.

Anything else?

Using a rewards credit card can help you earn cash back on the spending you're going to do anyway. Just be careful to not overdo it. Research has shown that swiping your card doesn't feel as "real" or painful as handing over cash. So make sure this smart move doesn't turn into one you regret in 2023.

Also be careful if you're using "buy now, pay later" services like Klarna, Affirm, and Afterpay. These let you pay for online purchases in small installments, usually interest-free. But buy now, pay too late, and you could get hit with fees.


The end of the year comes with festive vibes, classic movies, and great cookies. Oh, and financial stress. This year's shortages and shipping delays could make things even more complicated. But some smart planning and budgeting can help you spread cheer without spreading yourself – or your wallet – too thin.

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