How to Create Your 2021 Holiday Budget

Kalicia Bateman

Last Updated: October 29th, 2021

Another holiday season is upon us. Whether that elicits visions of sugar-plums dancing in your head or just sheer panic, it is time to start making your lists and checking them twice; it's time to talk about a holiday budget. You may have just rolled your eyes, but a holiday budget could save you not only from stress, but it can also save you lots of time and money, which might be the greatest gift you could give yourself this year.

While some consumers feel that budgeting takes the fun out of the holiday season, financial experts are fairly adamant that making and sticking to a holiday budget is important.

This year, holiday sales are expected to rise significantly from last year — by 8.5 to 10.5 percent. Whether or not you’re planning on spending more this holiday season, making a holiday budget could keep you from having a blue Christmas.

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2021 Holiday Budget Template

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To help you get started on making your holiday budget, we’ve compiled some helpful tips and strategies that will have you rockin’ around the Christmas tree this year.


How to create your 2021 holiday budget

Creating a holiday budget can be daunting, but it doesn’t need to be. While these tips and strategies for building your budget may not be comprehensive, they can provide you with a good place to start your holiday planning.

Be Realistic

Consider All Costs

Set Hard Limits

Do Your Research

Pick Your Payment Method

Be realistic

This is a key concept when it comes to holiday budgeting.

Kevin Panitch, founder of Just Start Investing speaks to this point by emphasizing not stretching your budget beyond what is needful: 

"One important aspect of holiday budgeting is to be realistic, both in terms of how much you can save and how much you could be spending. I'm sure many of us would love to spend more on loved ones than we already do, but that doesn't mean we should stretch our budgets so much that we can no longer achieve them sustainably."

Although it can be stressful trying to balance how much you would like to spend on some loved ones versus how much you can actually afford to spend, the stress of falling into debt is far greater. Matt Edstrom, CMO of GoodLife Home Loans, drives this point home:

“Whatever irrational guilt you might feel from not spending enough on gifts will dissipate much faster than the guilt you’ll feel from putting yourself in any sort of debt. If you struggle with impulse spending around the holidays, constantly remind yourself of the stress that stems from debt.”

Consider all costs

A very important aspect of your budget will be outlining all possible costs that you may accumulate throughout the holiday season:

  • Food — Are you planning on some holiday baking? Maybe you’re in charge of a fancy holiday feast, turkey and all the trimmings? Just keep in mind that there are costs attached to whatever you’re planning to cook, bake, or snack on, and turkeys can cost a pretty penny.
  • Gifts — The holidays are generally a season of giving, and it can be fun to surprise your loved ones with something they’ve been eyeing for months, but that doesn’t mean that you need to break the bank.
  • Postage — If you're planning to send packages and/or letters to friends and family, it's important to factor in the cost of postage, particularly if you'll be sending items internationally. Post offices also become very busy during the holidays, so you may want to schedule out time, or get to the post office before the "holiday rush".

Set hard limits

While some people set a dollar limit that they can afford, others just go spend and add up the receipts later. Have you ever considered how much of your annual income you spend in the holiday season? This perspective can be helpful when setting financial limits. Leslie Copeland, chief strategy officer at Ascend Federal Credit Union cautions, "Shoppers should spend no more than 1.5 percent of their annual income on holiday expenses. Once that number is set, they can plan out gifts, food, entertaining and travel costs." 

What does 1.5 percent of an annual income look like?

  • If you make $10,000 per year, your max holiday budget should be $150.
  • If you make $20,000 per year, your max holiday budget should be $300.
  • If you make $40,000 per year, your max holiday budget should be $600.
  • If you make $80,000 per year, your max holiday budget should be $1,200.

Do your research

With all costs considered and your spending limits set, it can be tempting to just go and spend your whole budget without any real thought. However, before you start spending, it can be beneficial to take the time to do some research: compare and contrast prices on items and see where you can get the best deals.

Nishank Khanna, CFO of Clarify Capital, stresses that “reviewing sales is essential for the holiday season. If you don’t take the time to look up holiday promotions and discounts, you’re leaving money on the table. Why pay more for something than you need to? Doing your research before making purchases helps markets stay competitive and more importantly, means more money in your pocket.”

A quick way to easily compare product prices is by simply searching for it in Google. The search results should populate various retailers that carry the product, also listing prices and any promotional options available. 

Another helpful option is to download a Google Chrome extension, like Honey, that will search the internet for the best prices and discounts that are available with the online merchant you are visiting at the time. 

Pick your payment method

When it comes to purchasing your holiday items, you can choose from a variety of payment methods, which is both a blessing and a curse. You could choose to shop with just cash, but debit or credit will likely be your go-to options, with the majority of consumers likely choosing to use their credit cards. 

Shopping with a credit card can be somewhat dangerous, as consumers often spend more with a credit card than they would otherwise. However, credit card rewards can be a great way to finance some of your holiday shopping.

woman making a purchase with a credit card

Michael Micheletti, director of corporate communications for Freedom Debt Relief, outlines how to use your credit card rewards to your advantage during the holiday season:

If you have a credit card account that offers rewards points, check your statements (or online accounts) to see how many points you have. Then visit the rewards website to convert the rewards into gifts, gift cards, or cash. Some rewards providers may even double the value of rewards at specific retailers.

In some cases, you may be able to use the converted points as actual gifts for someone on your list. Otherwise, convert to rewards you can use yourself for everyday expenses (e.g., at a grocery, discount or big-box store), and then allocate that amount you’ve saved to your holiday budget.

In addition, two major retailers (Amazon and Walmart) give you the opportunity to view and use  your points across many different card providers within their online or application experience. This option really does provide transparency into using credit card points at the point of sale versus the often cumbersome experience of having to use individual lender websites.

Another option that you can use for payment, that is not only unique but offers a surefire way to control your spending, is by using gift cards

Think of where you normally do holiday shopping in the past, or stores that you visit frequently throughout the year. Instead of trying to set aside some money close to the holidays, which will likely just cause you more stress, set aside certain amounts of money throughout the year by purchasing gift cards for yourself to use during the holiday season. Then, when the holidays roll around, discipline yourself into using those gift cards for any holiday purchases. If buying gift cards at specific stores appears to be too limiting, consider looking into a Visa or Mastercard gift card that can be used at nearly any retail location, including online.

One last payment method that you could consider, but shouldn’t necessarily be quick to use, is a personal loan. While applying for a personal loan could be a quick way to get some extra cash for the holidays, it would not be generally advisable to go into debt to finance your holiday festivities.

However, if a personal loan could help you take care of holiday expenses, and you are confident that you’ll be able to pay your debt back in the new year, there are many lenders that you can choose from.

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How to stick to your holiday budget

Making a budget is one thing, but sticking to it is an entirely different task. If you’re like me, you may make a budget and feel ready to take on the world and then just never look at it ever again. However, I would not encourage this practice, especially during the holiday season.

Holiday shopping mall

So, what can you do to stick to your holiday budget? Here are a couple of ideas:

Make lists (and stick to them)

Making a list and checking it twice is never a bad idea when you’re trying to stick to a budget. Carefully consider what items belong on your lists, which will likely be informed by the product research you’ve done previously. Then, bring your list (physical copy or digital) with you when you go shopping, and stick to it!

A helpful way you can manage your lists and shopping is by setting reminders on your phone, a suggestion made by Gareth Seagull, founder of Finance Friday:

“Set reminders on your phone for when you go shopping. Depending on your phone, you may be able to attach the image of your budget on [the reminder], so every time you go shopping, you have the budget right there, and you’ll never forget.”

Map out stores to visit

Whether you’re shopping in person or online, map out which stores you want to visit. This can most definitely save you time and money, as you won’t get distracted by other retail options around you.

Start shopping now

Sometimes the holidays creep up on you and catch you completely off guard. In those moments, you may find yourself tearing through the mall on Christmas Eve, or hoping and praying that Amazon’s two-day shipping could magically occur in just one day. To avoid this stress, it is ideal to start your holiday shopping early, a practice which could also help you stick to your budget.

Cristina Yasakci, a senior credit manager at Credit Achievers Today, speaks to this point: “We tend to spend more when we are rushed or in a hurry. If you take a little time organizing your strategies, it will make the whole experience fun!”

Save yourself the stress and the money, and even have some fun while you’re at it, by getting started on your holiday shopping early.

Stay focused

Holiday shopping can be a time fraught with temptation, because chances are that as you’re shopping for others or picking up your holiday treats, you’ll come across some things you’d like to purchase for yourself. But, you must remain focused on the task at hand. Even what may seem like multiple small purchases can throw off your budget, which could lead to cutting corners in other areas that you weren’t initially planning on.


How to shop safely online

More and more consumers are relying upon online shopping to make their holiday purchases. Online shopping is convenient, but it is important to keep yourself safe online, not only from spending too much but also from scam and/or fraud. Here are some strategies to help:

Protect against e-commerce fraud

E-commerce fraud is any type of fraud occurring on an e-commerce platform, and usually involves the use of a stolen or fake credit card or a fake identity. Thus, it is important to protect your credit card and personal information. Internet security company, Norton, suggests the following to protect yourself online while shopping:

  • Shop only on secure websites.
  • Do your research on the company and website before placing an order.
  • Take a look at the website’s privacy and security policies.
  • NEVER give out your social security number. If an online retailer asks for this information that is a big red flag.

Taking the time to make sure that the websites you are shopping on are safe can save you a lot of trouble, and even a lot of money, overall!

hand holding a credit card

Don’t get caught up in convenience

Online shopping is convenient and very easy, which is a blessing and a curse — a blessing because you don’t even need to leave your bed, but a curse because it’s a lot easier to spend more than you would if you were in a store.

Although Yasacki urges consumers to start shopping early, she also advises taking extra care while online shopping:

“Yes, shopping online can be easier, but, also a lot more dangerous. It is that much easier to get caught up in the moment. These conveniences can be very dangerous, particularly because you will be right back to using your credit cards.

Be careful not to fall for the hook of “free shipping,” and make sure to compare all the prices for the same item. Is the shipping price built-in the price of the item? Or, is it free shipping if you spend above a certain amount?”

Although “free shipping” is always a tempting option, make sure you check your prices to see if it’s actually worth it. Additionally, taking care with your credit card usage could save you a lot of stress and money later on.

The final word

Heading into the holidays can be a stressful time. But, with a little but of planning and research, you could save yourself from the stress of overspending this year. Although there are surely many other tips and tricks for creating a holiday budget and saving money, this guide can be a good place to start.

2021 Holiday Budget Template

Use our holiday budget template to track your expenses and save money this year!

Download Now
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