Building a budget for the winter holidays

It's always a good idea to get finances in shape ahead of the winter holiday rush. In 2023, 43% of shoppers started holiday shopping before November, mostly to spread out their budget and avoid last-minute shopping stress.¹

Read on for money-saving tips for the holidays, financial mistakes to avoid, and holiday spending and budgeting best practices.

The importance of planning a holiday budget

Creating a holiday budget can be a great way to plan ahead for the season. It can also help track expenses during a high spending period and help avoid debt. Good planning usually keeps financial stress at bay, too.

Here are the potential benefits of a well-thought-out holiday budget:

• Less pressure. With so many events, catch-ups, and festive interactions, a budget can help minimize financial stress, freeing up time and energy for enjoying gatherings and connections.
• Wise spending. Knowing what expenses are coming in advance helps to keep finances on track while allowing flexibility with spending where necessary.
• Debt avoidance. A budget can help reduce the impact of unexpected costs or expenses that can arise during winter holidays, keeping potential debt to a minimum.
• Clear boundaries. Clarifying incoming and outgoing cash flow using a personal budget planner can work to determine limits on how much money is allocated for trips, meals, gifts, and other holiday necessities.

Holiday budgeting tips

For shoppers wondering how to budget for the holidays — or even save money more effectively during this time — there are some key strategies that can help.

Start planning early

It’s never too soon to start holiday planning — early planning can prevent poor budgeting and help lower stress. Shoppers are encouraged to set time aside and prioritize this task first.

Assess current financial situations

To make firm decisions about holiday finance, shoppers need to understand their personal money situation. The steps in laying out an effective financial plan need to be clear and straightforward — and in line with one's own situation. Here's how to determine a realistic budget:

• Assess. First, shoppers should determine their current finances and factor in any holiday funds that have already been set aside or specific windfalls being relied upon.
• Calculate. This involves coming up with a total budget list for the holidays, adding up all costs, and planning to stick to the determined amount.
• Monitor savings. Staying on top of transactions means making sure income and savings can adequately cover expenses each month leading up to the holiday period.

List all potential holiday expenses

Creating a definitive list of holiday expenses — as well as potential spending — is important for keeping track of a holiday budget.

Some of these expenses might include:

• Gifts
• Decorations
• Travel and accommodations
• Food and drink
• Events

For holiday meal planning tips, it can help to consider a basic list of dates and potential meal ideas. Keep the ingredient list simple, rely on leftovers, and factor in any additional spending on the expense list accordingly.

Set spending limits for the holiday season

Determining a clear and measurable spending cap is a great way to track outgoing money over the holiday season.

Place spending limits for each category on the holiday expenses list — as a proportion of the total budget — and remember to prioritize essential expenses over less-needed items. This can go a long way in managing holiday spending.

Track spending closely

Expense tracking can further help with sticking to a budget, offering a clear view of all spending and monitoring spending for specific holiday categories.

Spreadsheets and manual lists can be useful, as well as using a budget app to track spending. Budget or spending tracker apps may help reliably keep tabs on expenses in real time.

Leverage deals and discounts

Alongside money management, it’s possible to stretch the budget even further by seeking out bonus shopping deals and discounts. This includes shopping during sale periods, taking advantage of store offers and winter holiday deals, and stocking up on savings coupons.

There are tools out there for shoppers to get coupons, discounts, and deals. Web browser extensions, like the PayPal Honey shopping extension, help find coupons and deals online at the click of a button.

Using rewards cards or cash back cards can be a useful way to earn when spending, whether receiving points or direct cash back. For example, with the PayPal Debit Card², customers can earn 5% cash back in one of five monthly categories – gas, groceries, restaurants, clothing, health and beauty – when shopping online or in-store.

Cash back apps or rewards programs can be used in addition to a linked payment method to stack rewards and benefits. For example, PayPal users can select and save cash back offers from hundreds of brands in the PayPal app. If a user saves a cash back offer in the app and then checks out with PayPal online using their PayPal Debit Card, they’ll earn an extra 5% cash back on top if the items are in the same monthly category selected for the PayPal Debit Card.

Invest in DIY alternatives

Finding cost-effective alternatives for traditional holiday expenses is another way to save money. For instance, homemade items and decorations can be an affordable and personal way to give gifts.

Seeking out cheap holiday activities, making meals at home, keeping festivities in-house, and considering a winter staycation instead of an expensive getaway are just a few more cost-saving ideas.

Build a holiday budget and start saving

While everyone’s holiday budget will be different, planning early gives the best possible chance to stay within spending parameters. Remember to create a clear plan and stick to it to help keep financial life on track and ensure the holiday season is full of stress-free festivity.

Start saving with PayPal.