Earlier this year, I started a sinking fund for Christmas gifts, with the goal of saving $300 by mid-November. I knew I’d spend more than this goal, but I wanted to have some funds set aside to avoid overspending at the last minute.
I followed what many personal finance experts recommended for holiday spending. I set a budget, shopped the early deals, and even cut back on who received gifts from me this year. And I still overspent.
I’m not alone. Almost 70% of shoppers surveyed in a CNET survey plan to overspend this holiday season. And while I didn’t land in credit card debt or tap into other savings, reflecting on my holiday spending makes me think about what I’ll do differently next year.
Here’s how much I spent this holiday season (so far) and how I’m preparing as we head into 2024.
My 2023 holiday budget
Christmas time is costly in my house, but it’s special. So I don’t mind allotting a little more of my budget to holiday expenses. To help, I try to plan upfront as much as possible.
This year, my husband and I made a list of people we want to give gifts to this year and set a dollar amount based on the items we wanted to get, other upcoming expenses and anticipated sales prices. For instance, I bought my sister-in-law a kitchen gadget that she’d been asking for that was likely to go on sale (and it did).
We put our recipients into different categories and set our overall budget. Here’s what it looked like and how much we actually spent:
| Category | Budget | How much I spent |
| Gifts for my kids | $250 | $400 |
| Gifts for family | $300 | $295 |
| Miscellaneous gifts | $100 | $150 |
| Holiday decor | $100 | $200 |
| Holiday activities and outings | $200 | $250* |
| Total | $950 | $1,295 |
How I avoided debt while overspending
Aside from the gifts for our families, we overspent in almost every single category. It was a bit unexpected since I usually don’t go over budget. And I’m lucky that this move didn’t set us back financially. But it easily could have, had it not been for my husband’s unplanned work bonus. But if a surprise home or car repair popped up, we would have had to make some tough decisions.
Since I can’t expect a bonus to give me more spending power next year, I’m planning in advance and outlining a budget with this year’s expenses in mind.
Set savings goals early in 2024
Planning ahead for the end of 2024 while we’re still wrapping up 2023 may feel like overkill. But I want to be ready. This year, I didn’t start thinking about Christmas shopping until August. That only gave me time to save $300 before buying gifts in November. Next year, I plan to save $55 per month, which will give me double that amount when it’s time to buy gifts next year.
Depending on my other financial goals, I may make additional one-off transfers to my sinking fund, but the goal is to set aside at least $600 by November. The earlier I start saving, the more comfortable I’ll feel about buying gifts.
Just like this year, I’ll continue stashing the money in my high-yield savings account to earn interest throughout the year. I use Ally’s saving buckets to track my progress and make sure I’m working toward other bucket goals too. For example, I have separate buckets for my emergency fund, travel sinking fund and a new car that my husband will need within the next year.
Create a flexible budget
I didn’t factor in my kids’ interests changing and how much inflation would impact my spending power. Initially, we budgeted $250 for gifts for our kids. All in all, I wanted to spend less than $1,000 on the holidays this year.
While I could’ve bought fewer gifts for the kids, I realize now that I didn’t set a budget that aligned with the Christmas I wanted them to have. Had I set a more flexible budget, I would have been able to save more toward my goal, and I wouldn’t feel like I spent so much in such a short amount of time.
Make a list and keep an eye on deals
I started shopping early to get the best deals, and I’m glad I did because I saved 40% to 50% on gifts that I otherwise wouldn’t have purchased. But even though I started early, I quickly lost sight of my budget when buying for my kids.
I created a list for my two young kids based on their interests. But as more big-ticket toys were marked down (some even on clearance) and I received their wish lists, I bought beyond my original list. For example, a new Hot Wheels race track was on the list for my toddler, but I later realized I wanted him to have more cars to race with.
I also didn’t add new holiday decor to my shopping list, but since I knew I wanted a bigger Christmas tree, I should have. I got my tree for a bargain, but I spent more than I planned since I didn’t budget money toward this purchase.
Every holiday budget is different and that’s OK
Christmas is a big deal for my family, so I don’t mind spending more during this time of year. But your budget for the holidays may look very different from mine. If your family travels to see grandparents or loved ones or plans a warm-weather trip in January, you might allocate more of your budget this time of year toward those experiences instead. If, like me, you spent more money than you planned on the holidays, get a head start in the new year to give yourself more time to prepare your wallet and hit your target saving goal.
