6 Steps to Financial Goal Planning for Christmas

By Aaron Crowe

December can be one of the most stressful months of the year. At a time when you’d like to spend time with friends and family, the weeks before Christmas can be full of shopping, eating too much, travel and spending too much. Meeting any financial goal can seem impossible.

That financial stress can increase if you don’t have a budget and didn’t set financial goals for Christmas months ago, such as last summer.

But it’s never too late to set financial goals, even with days or weeks before Christmas. Here are six steps to get your Christmas budget in order:

1. Set a dollar goal

If you don’t have a specific goal in mind, it’s difficult to know where you’re headed. Come up with a dollar amount that you feel comfortable spending on Christmas.

The amount should include everything you plan on buying at Christmas that you normally wouldn’t buy. Buying extra food for a holiday party at your house? Put it in the budget. Flying to grandma’s house for Christmas? Add the cost to your budget.

Gifts are a big expense at Christmas, so come up with a solid idea of how much you want to spend on each person and add it up.

Also factor in entertainment, decorations and if you’re buying a new ugly Christmas sweater this year. Finally, add in some miscellaneous costs for your budget, because something always comes up.

2. Determine what you can afford

After coming up with a budget wish list of expenses, it’s time to cut it down to what you can afford.

Maybe you can’t afford to travel across the country for the holidays and buy the people you’re visiting presents. Tell them you’re under a tighter budget this Christmas and that you’d rather pay for a trip to spend time with them than to send them gifts.

Unless you’re willing to go into debt, chances are that some things will have to be cut from your Christmas budget. If your top financial goal for Christmas is to only spend what you can afford, then setting a budget that you’ll stick to is an important step.

3. Pay in cash

A common way to stick to a budget is to buy only what you can afford with the cash on hand. If you don’t have enough money in your checking account to pay for a purchase immediately, then don’t buy it.

Do not pull out your credit card. The goal is to have a budget and stick to it, and having a credit card bill in January is one way to avoid overspending.

4. If using a credit card, plan ahead

Using a credit card during the holidays can be a disaster. It can give you the ability to buy something on a whim without considering the financial implications.

But if you’ve set a Christmas budget and already have the money in the bank to pay the credit card bill off fully when it arrives, then using a credit card can be a smart way to earn credit card rewards.

Not having a cash back rewards credit card could mean missing out on an easy bonus for spending that you’d normally do anyway — but only if you pay the bill in full and on time.

The average American spends $1,500 on dining out annually, but one in eight consumers don’t have a credit card with cash back rewards, according to TD Bank’s Consumer Spending Index.

The average consumer generates nearly $150 of cash back rewards in one month of spending, leaving the equivalent of a month of dining out or a month of gas on the table if they don’t have such a credit card.

If you’re getting a holiday bonus at work, you can put your holiday spending on your credit card and use the bonus to pay off the credit card after Christmas.

5. Shop with your credit score in mind

If you need another incentive not to overspend at Christmas, consider what it could do to your credit score.

If you don’t pay your credit card bill on time because you can’t afford it, it will hurt your credit score. Having a high credit utilization amount — 30 percent or more of your credit limit is being used each month — then it could also cause your credit score to drop.

If you can’t get around to checking your credit score during the busy month of December, then set calendar reminders to check it in January and every four months afterward to make sure it’s accurate and that you’re not doing anything that’s harming it.

6. Start saving now for next Christmas

If it looks like your Christmas budget will be blown this month, don’t despair. Cut expenses to what you can afford and vow to save more for next Christmas.

Set up a Christmas savings account now and have money automatically deposited to it each month from your checking account or directly from your paycheck.

Use the Christmas budget you’ve set up for this year, increase it by 10 percent, and then divide that by the number of months you plan on saving for it — hopefully 12 months. That should make saving for Christmas easier and will give you enough cash to be debt-free next Christmas.