Planning & Budgeting

How to Budget for Christmas

Christmas is a wonderful time of the year. The holiday is all about spending time with loved ones, eating good food and enjoying the TV specials. But all that fun can quickly cause a hole in your bank account. How to set a budget for Christmas and stick to it?

 - 6 Min Read
Last updated and fact checked:
How to Budget for Christmas
Editorial Note: We earn a commission from partner links on Pension Times. Commissions do not affect our writers’ or editors’ opinions or evaluations. Read our full affiliate disclosure here.

Christmas is a wonderful time of the year. The holiday is all about spending time with loved ones, eating good food and enjoying the TV specials. But all that fun can quickly cause a hole in your bank account. How to set a budget for Christmas and stick to it?

Why should you set a Christmas budget?

Having a budget can help you control your spending. Too many of us have opened up the credit card bill in January and faced the consequences of unplanned spending. With a well-thought budget, you can:

  • Control your spending and ensure you don’t spend more than you can afford.
  • Make smarter decisions and avoid spending money on unnecessary or useless things.
  • Enjoy a happier holiday because you don’t need to worry about money constantly.

4 steps to a Christmas budget

Setting up a budget for Christmas doesn’t take long. You can take a piece of paper, grab a pen, pour yourself a glass of mulled wine and set out a budget with a few simple steps.

1. Create your Christmas spending list

First, you can think about the different things you need to spend money on Christmas. You can start with broad categories that include:

  • Food
  • Gifts and cards
  • Decorations
  • Christmas entertainment, such as money to visit the pub during the holidays or attending Christmas shows
  • Christmas travel

You can divide these to further categories if you want. For example, your food could detail a budget for the food you’ll buy from the supermarket and cook for yourself, as well as the money you’ll spend on takeaway food during the holiday.

In the gifts category, you should list all the different people you want to give a Christmas gift. You also want to have a figure for how many Christmas cards you need to buy to budget for stamps. In essence, you want to be as detailed and specific as possible.

2. Figure how much you can spend

You should then think about the amount of money you can spend on Christmas shopping. Your spending would include:

  • Any savings you have for Christmas spending
  • A portion of your monthly income
  • Any credit card spending you are willing and able to do

First, start by looking at any savings you have. It’s a great idea to save for Christmas throughout the year. If you put aside even £20 every month, you’d have £240 to spend in December. If you can top this to £50 a month, you would save £600 to spend. That’s a lot of money! You might not have time to do much saving this year, but keep this in mind next year.

You can then look at your regular monthly income and identify how much you can use for Christmas shopping. You will have your usual monthly expenses to cover, of course. But you could also squeeze out a bit more towards your Christmas shopping.

Finally, you can use the ‘buy now, pay later’ strategy. The main thing is to never get in debt for Christmas spending. It’s possible to have a fantastic Christmas no matter what your budget is. Don’t create financial burdens you can’t handle just for the sake of having fun. Credit cards can be useful, but only if you budget in advance. You need a plan to pay the credit card bill in full to avoid expensive interest payments. Use this money in your budget only if you know you can pay it back next month!

3. Think about your priorities

When it comes to allocating your money, your focus should be on identifying your priorities. If you don’t have an unlimited budget and you’re working on a smaller budget, you want to make smarter shopping decisions.

Your Christmas priorities can be different from someone else. Perhaps you want to focus on getting pricier gifts to your grandkids but don’t care about the decorations as much. If food is important to you, then have a smaller budget for gifts and so on. Allocate the money you’ve identified based on those priorities.

4. Don’t just allocate money

You shouldn’t just budget money but also your time. Christmas is not just about spending cash on gifts but also about spending time with loved ones. If you have time on your hands, then you can also save money!

You can make your own Christmas gifts, for example. Baking homemade sweets or creating the perfect Christmas jam to gift to neighbours and relatives is a wonderful idea. Not only is it often a cheaper alternative to buying something from the store, but it’s also a very thoughtful gift.

You can also spend a bit more time and save money by making most of your Christmas food. Homemade mince pies and cakes could be cheaper than buying the readymade versions from a store.

When you are budgeting this Christmas, don’t stare simply at how much money you can spend. Consider the time you could set aside and the money you might save by doing it!

Compare and scout for deals

When you start spending money on Christmas shopping, don’t just run into the first store and buy the things you see. The best way to stay on budget is to compare options and scout for the best deals. You can find plenty of offers with a quick Google search and have an idea of what stores sell the things you are looking for. Don’t forget to take advantage of your cashback credit cards and loyalty cards, too!

Keep track of your Christmas spending

Having a Christmas budget is not enough. You need to make sure you stick to the budget and adjust it accordingly. When you start buying things for Christmas, keep track of your spending. Don’t just create a total tally of your spending but keep an eye on the categories. If you spend a bit more on a gift to your spouse, think about where you can save instead of simply stretching your budget.

Remember to stick to your budget and your shopping list. Budgets tend to fail if you don’t stick to them. It’s OK to be flexible within your budget and make small adjustments. But avoid creating new categories and lists on a whim.

Once the holiday is over, you can look back to your budget and analyse the things that worked and those that didn’t. Your Christmas budget this year can help you create an even better one for next year!

The content on is provided for informational and educational purposes only and should not be construed as professional financial advice. Should you need such advice, you should consult a financial adviser that is registered with the Financial Conduct Authority. Any references to products, offers, rates, and services from third parties or those advertised are served by those third parties and are subject to change. We may have financial relationships with some of the companies mentioned on this website. We strive to write accurate and genuine reviews and articles, and all views and opinions expressed are solely those of the authors. We are not regulated by the Financial Conduct Authority to provide advice, to act as an authorised introducer, or to otherwise sell any financial services or products. However, we endeavour to only link to and highlight brands that are authorised and regulated by the Financial Conduct Authority and/or the Prudential Regulation Authority, and where your money will be protected by the Financial Services Compensation Scheme should you choose to buy a product or service from that particular brand.
See More