Don’t feel like screaming when you see Christmas displays in stores before Halloween? Or when “It’s Starting to Look a Lot Like Christmas” has been on your mind for two months because it starts playing in early November?
Christmas creep can be annoying, but there’s at least one good reason to start thinking about the holidays before the leaves start changing colors: it gives you more time to save.
Given the current trajectory of holiday spending, you’ll need that secret savings stash.
The National Retail Federation found that holiday spending increased 14.1% in 2021, with American consumers shelling out more than $886 billion to spread some holiday cheer.
Waiting until November or December to prepare for these expenses means you’ll often end up billing for your purchases and paying them back — plus interest — well before the New Year. Instead, start a Christmas savings plan now to avoid debt and overspending.
6 Steps to Create Your Christmas Savings Plan
Confused about how to save extra funds for the holidays? Here are six easy steps to get you started.
Step 1: Start with the end in mind
To save enough money to cover all of your vacation expenses, figure out how much you plan to spend and divide it by the number of weeks you have until you start shopping. This will tell you how much money you need to save per week to build up your Christmas fund. In personal finance, this is called building a sinking fund.
Step 2: Create a gift list
To estimate your overall savings goal, first make a list that includes who you’ll be shopping for and how much you’ll spend on each person. It can be useful to refer to what you spent last year. Or you can find the prices of the items you plan to buy for each person and add them up.
Step 3: Double check it
Warning: Your Christmas savings plan must cover more than gifts. So add estimated costs for decorations, food, and holiday events to your shopping list. Between special events where you give a bottle of wine, gifts for your kids’ friends, or a secret Santa at the office, to the abundance of food during the holidays, these “extras” can really add up.
How much should I budget for seasonal extras? The average cost of wine varies from state to state, but ranges from $10 to $15 a bottle. And if you want to bring a dozen bakers to the holiday party, Hello Fresh’s 2021 Christmas Cookie Price Index reveals that the ingredients will set you back around $6.10 per batch.
Step 4: Do the math
Total it all up and divide it by the number of weeks left until you hit the stores. Unless you’re a fan of last-minute shopping, that means giving yourself some breathing room before December 25.
To make it easier, we’ve defined how much you need to save per week over a 12-week period to get between $200 and $1,000 extra money for the holiday season. Statista says the average American consumer spent about $886 on Christmas gifts during the 2021 holiday season.
If your Christmas budget is $450, you will need to save $38 per week for 12 weeks. If you want to save $800 to meet your Christmas savings plan goals, you need to set aside $67 a week for 12 weeks.
Step 5: Consider setting boundaries
Another tactic for saving while on vacation is to figure out how much money you can save and create your vacation budget based on that. For example, if you can only save $25 a week for your Christmas savings, you’ll save $300 in 12 weeks. This would be your limit for all your vacation expenses.
If you think you’ll need more money to pay for all your Christmas expenses and still come out debt-free, you’ll need to start saving earlier so you have more weeks to save. In fact, you can implement your Christmas savings plan any time of the year.
Step 6: Separate your vacation savings
When you start saving for Christmas, it’s a good idea to keep your holiday savings separate from the rest of your money so you don’t accidentally spend your stash on day-to-day expenses. If you use a savings subaccount at your bank or credit union, set up automatic savings transfers each week to ensure you stay consistent.
If you choose the cash envelope route, make sure you have an envelope dedicated exclusively to vacation expenses and not other short-term goals. Set weekly calendar reminders to prompt you to save money.
2 tips to help you save money for the holiday season
When saving money in the short term, there are two basic strategies to consider.
Strategy 1: Reduce expenses
Cutting the fat from your weekly expenses is a good way to find some extra cash to invest in Christmas gifts. Take out your budget and highlight any non-essential recurring expenses. Identify a few — like fast-food meals or visits to the nail salon — that you can forego until you’re done with your holiday shopping.
If you want to quickly increase your savings, try a no-spend challenge. Or cut your grocery budget by taking the pantry challenge and plan your meals with what’s already at home.
Strategy 2: Generate additional revenue
Saving money for the holiday season isn’t just about making cuts. You can temporarily boost your income by getting a part-time holiday gig (bonus if you get a corporate discount) or doing odd jobs on Fiverr or TaskRabbit. Or put your hobbies to work by creating and selling something cute and crafty on Etsy. And don’t forget to make room for the new gifts you’ll receive from cleaning out your closets and selling stuff online.
How to save money on gifts during the holiday shopping season
In addition to a Christmas savings plan, you also need to establish a financially comfortable Christmas budget for yourself.
Here are seven ways to spend less this holiday season:
1. Make your own gifts.
Be crafty and DIY Christmas gifts for your friends and family.
Worried your homemade gift will look kitschy? Try our 100 holiday gift ideas that won’t cost you a penny for affordable gifts your friends and family will treasure.
2. Buy early and take advantage of sales.
Rather than waiting until you reach your Christmas savings goal, you can use the money you’ve saved to buy gifts sooner whenever you catch something on sale. Bonus if you have saved coupons.
Buying early can be especially important this year as supply chain issues persist. The adage “time is money” is true during the holiday season, when finding popular Christmas toys can be difficult.
3. Use old gift cards.
It’s easy to forget about gift cards you received a long time ago that still have a balance. Take out your cards and check the balance. Buying gifts with your gift cards will free up money to use for something else.
Can’t find the gift voucher to use your gift card balance on? Check out our tips on the best sites to sell gift cards and turn that plastic into cash.
4. Cash out your credit card rewards.
If you get cash back or points for swiping your credit card, save them up to use for vacation spending. Just be responsible with your credit card so you can triumph in a debt-free Christmas.
Check out our recommendations for the best cash back credit cards.
5. Implement the rule of four gifts.
Save money by limiting the number of gifts you give your children. The four-gift rule is to give each child four things: something they want, something they need, something to wear, and something to read. Plus a little bonus from Santa, especially for the little ones.
Learn more about the four gift rule here.
6. Online comparison store.
Do your holiday shopping online and compare prices to get the best deal. Some browser extensions will even do the recording work for you. Be aware of shipping costs when shopping online. These stores offer free shipping with no minimum order.
7. Set your schedule for sales.
It’s easy to navigate and forget to go back for sale. Set up appointments on your calendar to remind you when holiday sale prices go into effect, especially for big-ticket items like electronics.
Not all holiday sales are equal. Use our best time to buy everything guide to get the best deals before Cyber Monday or Black Friday.
Kaz Weida is a senior writer at The Penny Hoarder. Nicole Dow is a former editor.
This article was originally published by The Penny Hoarder.
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