It’s not surprising that 64% of holiday shoppers admit to overspending over the holidays, and say they’ve never stuck to a shopping budget! If you don’t want to be in this bunch, read along to learn how to make a budget and stick to it this year.

Set a total budget

The first thing you need to do is decide how much you’re going to spend in total. This can’t be determined based on wishful thinking, or your credit card limit, or what you can afford if you exist on water and air till January; this can only be a figure that you can comfortably afford. List all your fixed expenses (which include any monthly savings you put away) and only then, you can calculate your disposable income. Don’t forget that this disposable income should also cover any extras that Christmas usually entails, like the new outfit you need for the office Christmas party, gift wrapping and postage, and so on. Factor all those in, and the rest should give you an idea about your Christmas gift shopping allowance.

Make a Gift List

Make a list of everyone you’d like to buy gifts for. Even if it’s a tiny gift, it goes on the list.

  • Parents
  • Siblings
  • Nieces and nephews
  • Grandparents
  • In-laws
  • 2 Friends
  • 1 Secret Santa at work
  • My accountant/doctor/janitor.

You get the idea.

After you’ve made a full list, ask yourself: can I trim it in any way? Highlight the non-negotiables and trim down the rest. Make it a point to yourself that under no circumstances you’re allowed to buy gifts to anyone who’s not on the list. It’s so easy to go gift shopping only to find the perfect gift to that friend of a friend you met once and Facebook-friended, especially with the holiday spirit that normally puts you in “giving mode”; but understand that whatever extra gifts you spend on, will be coming out of your gift budget or even your credit card. Do you really want to skimp on your loved ones’ gifts -or worse, go into debt- for a gift to someone you barely know? We didn’t think so either!

Another reason many people overspend on Christmas gifts is because it’s easy to feel guilty when it comes to holiday spending. Do you need to spend $50/gift for every one of your nieces and nephews? Definitely not!

Which takes us to a great idea from the Huffington Post: Assign a point value of 1 to 5 to each person or group of people based upon a comparative amount you would like to spend on their gifts. Then total all the points, divide the total amount you plan to spend by the total points, and go back through the list of people and multiply the Christmas budget factor by their point value.

An example would look like this:

If your budget total is $1,000, and your distribution is Parents (5 pts.), Siblings (5 pts.), Significant Other (5 pts.), In-Laws (3 pts.), Friends (3 pts.) and Secret Santa (2 pts.), your total points is 23 and your Christmas budget factor is 43 ($1000/23 = 43).

Hence, if you multiply each person’s point value by that amount the result is:

  • Parents: 5 x $43 = $215
  • Siblings: 5 x $43 = $21
  • Significant Other: 5 x $43 = $215
  • In-Laws: 3 x $43 = $129
  • Friend(s): 3 x $43 = $129
  • Secret Santa: 2 x $43 = $86

Et voilà! Now, you know exactly how much you can spend on each gift.

In this particular example, you’ll find that approximation left you with a spare $11. You can either use this as a maximum buffer, use it for coffee and lunch on your Christmas shopping day, or just add it to your savings and consider it your Christmas gift to yourself!

The Fun Part!

After determining how much you’ll spend in total, and how much you can afford to spend on each person on your list, it’s now time to get down to the fun part: what you’ll buy.

Don’t go to the shops empty handed (better yet don’t go to the shops at all!) Head to your shopping spree armed with a list of gift ideas. If you find a person particularly hard to gift shop for, just give them a gift card that they can split and redeem at all their favorite brands where they can get a gift they actually want.

Bonus Tips:

  • Go shopping by yourself. It’s easier to stick to budgets if you’re not accompanied by friends with poor spending habits.
  • Take advantage of Black Friday and Cyber Monday Sales. This way you score savings or bigger bang for your buck and split the spending over two pay-checks instead of one.
  • Go online first. It’s easier to compare, keep track of spending, apply discount coupons, and avoid temptation.
  • Be prepared. It’s the season of popping the question, so if you’re planning to propose or expecting a proposal, then don’t leave the expenses entailed (ring, engagement party, outfits, elaborate proposal plans) to the last minute – which can definitely blow your budget!
  • Do it Yourself. A lot of awesome gifts can be made in your own kitchen, from sugar scrubs to gingerbread men. If you’re crafty, use this to your benefit. You’ll save a significant amount of money, and a handmade gift will be way more perceived as thoughtful than any generic inexpensive thing you randomly pick up to stay under budget.
  • Stop guessing. If you don’t know what to get a specific person, ask them. If you can’t ask them then by all means don’t waste your money on something they’ll never use. Give them the gift of choice and end their year on a high note!

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