The holidays will be here sooner than you know it, and unless you plan a Christmas budget, you could be stuck with too many credit card bills long after the ornaments have been put away.
The first thing to do is set a Christmas budget so you can save enough money for presents or whatever else you want to buy for the holidays. The second step is to have a plan for how you’re going to use that budget.
Here are some ways to start planning a Christmas budget, and how to use it well:
Determine a Christmas budget
Setting a budget for gift giving is the best way to avoid overspending. How much did you spend last year? Did your income go up or down this year and how can it best meet your gift giving this year?
Make a list
Make a gift list for each person so that you don’t make impulse buys and go over your Christmas budget. Stick to the list, and leave room in the budget for decorations, parties and some unexpected expenses.
The Holiday Gift List App, available on iTunes for $1.99, helps shoppers track what they buy, who they’ve checked off the list and how much they’ve spent in total and per person, says Andrea Woroch, a consumer savings expert.
The app makes it easy to create a list of suggested gift ideas and an allocated budget per gift for each recipient, Woroch says.
It allows you to tweak how much you can spend on people at the bottom of your list, such as co-workers and neighbors.
Keep tabs on spending
As with almost any task, help is available online. Mvelopes, an electronic personal finance and budgeting service, offers free online envelope budgeting so you know where the money in a Christmas budget is going.
Don’t wait until after the holidays are over to see how much you’ve spent. Track expenses as you go so you’ll know when to pull in the reigns, recommends Steven Smith, president and CEO of Mvelopes.
If you’re not using an online program to track your Christmas budget, Smith recommends finding a method that works for you, whether it’s setting aside cash to pay for everything or adding up receipts each night.
Another option is OneReceipt, which runs as a website or app to store receipts in the cloud (digital and paper) and allows users to manage and categorize spending and provides a detailed overview of your spending habits.
OneReceipt interacts with your credit card or Mint.com accounts to help you monitor warranty and return information.
Spend less and still give great gifts
Avoid being seen as “cheap” by being creative with gifts.
Try things like focusing only on gifts for the kids or starting a family holiday tradition that involves a fun activity, Smith says.
You can limit the amount each family member spends and challenge them to be creative, present a themed gift or give a unique family heirloom, such as framed pictures.
Set a deadline for paying off all holiday expenses
If you charge $800 this holiday season, which is the average, Smith says, and make only the minimum payment on that debt, it will take almost 11 years to pay off and end up costing more than twice the original price (assuming a minimum payment of 2.5% or $10 and an annual interest rate of 18%).
Make sure you know the earliest you can reasonably pay off your holiday debt and push hard for that date.
Know what to do if you do overspend
If you do spend more than you planned to and went over your Christmas budget, there are a few ways to alleviate the pain, Smith says.
Start by determining if you can consolidate all of your holiday debt onto a lower rate card to avoid excessive interest fees. Try to pay more than the minimum balance each month.
Return unused or unwanted gifts and use the money to pay off debt. Make sacrifices to pay off holiday debt quickly, such as cutting back on eating out, vending machine snacks, post-holiday sales and other frivolous spending.
After getting out of holiday debt, start saving and planning ahead for a Christmas budget for next year.