It’s early December and the holiday season is in full swing. Everyone I talk to asks how I’ll be spending the holidays, the stores are filled with decorations, parties are being scheduled, and people are figuring out which gifts to buy. But all of those gifts, parties, travel, and all the rest cost a whole lot of money. If you don’t celebrate the major holidays in a big way, you probably still have to budget for office gifts, parties, seasonal tips, and such. So how should you budget for it all, and when should you get started?

The answer, actually, is right now. Start budgeting now for next year. If you’re reading this at a different time of year, the answer is the same: start now.

Why starting early works

There are two main reasons for you to start planning more than a year in advance. The first is simple: How much do you spend each holiday season? Do you know? Most people don’t. Some think they have a vague idea, but it’s often wrong. Others have no clue. You can go back over last year’s figures… if you can find all of the paperwork. Or you can simply start now and just keep track as you go!

The other reason to start now is so that you have plenty of time to save up for next year’s expenses. Don’t give yourself 2-3 rushed months. Instead, give yourself a whole year to save up leisurely!

How to do it

This is so much easier than you think. You’ll do it in four simple steps:

  1. Track your expenses in any way that works for you. Grab a notebook or open a spreadsheet, use a phone app or the back of an envelope. The method doesn’t matter as long as you’re consistent. Write down everything you spend money on and the amount. Include gifts, party expenses, holiday cards and their postage, plane tickets, and everything else you spend money on. Don’t forget to list the extra tips for your postal worker, hairdresser, etc. and charities that you donate to (unless you make monthly donations already.)
  2. As soon as the holidays are over, grab that list and add it up.
  3. Ask yourself if you’re comfortable with the total from #2. If you are, move on to step #4. If you’re not, consider which areas you’d like to cut back and by how much. Figure out your new total.
  4. Divide the total by 12. This is how much you need to save each month. Is it doable? Good! You’re done! If it’s not doable, go back to step #3. Repeat steps 3 and 4 until you find a monthly amount you’re comfortable with.

What to do with the money

That’s it! See how easy it is? If you tend to run out of money every December, make sure you set up a holiday savings account that’s separate from your other accounts. Set up a new account at your bank, or even use another bank. There are many online that are easy to set up. Add to it every month. Then when the holidays roll around, you’ll have all the money you need!

How your budget might look

Let’s say you add up your holiday expenses and they come to $2500. That feels like too much, so you decide to cut back on a few things.

The new total is $1800. You decide you’re comfortable with that so you grab your calculator and see that $1800 / 12 = $150. You need to save $150 per month. Your account balance looks like this:

  • January $150
  • February $150 + $150 = $300
  • March $300 + $150 = $450
  • April $450 + $150 = $600
  • May $600 + $150 = $750
  • June $750 + $150 = $900
  • July $900 + $150 = $1050
  • August $1050 + $150 = $1200
  • September $1200 + $150 = $1350
  • October $1350 + $150 = $1500
  • November $1500 + $150 = $1650
  • December $1650 + $150 = $1800

As you spend money from this account in December, you’ll see the balance going down, and you have to be careful not to overspend. You’ll need to look back at your notes from this year to remember where you had decided to cut back. But thanks to this savings, you won’t have to worry about running out of money! And when the holidays end, you can just repeat this simple process again.

Debt be gone

If you usually go into debt at the holidays, or worry that you will, this process should save you a whole lot of stress. After all, you won’t have to worry about going into debt if you already have the money saved up! So go and enjoy your stress-free holidays! After all, this should be a time for fun, not for stressing out over money. And maybe as a gift to others you’ll share these tips so they won’t have to stress out about holiday money anymore either.

Now, to get you started off right, try these 5 quick ways to save an extra $100 and put that money towards your new holiday fund. You’ll be off to a fabulous start!

When you’ve had a chance to try this holiday funding program, please come back here and comment to let us know how things went!

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