How to Have a Debt-Free Christmas

Don’t worry, I haven’t lost my mind. I know it’s July. But it’s also the perfect time to start planning. A phenomenon that I consistently see happen, year after year, is post-Christmas regrets because of overspending.  Christmas is on the same date every single year, yet there are always folks that are “surprised” by Christmas and have no plan for how to pay for it. And it’s a terrible feeling to start of the new year with a huge credit card bill because Christmas hit your pockets hard. Early preparation is a key element of being prepared for the cost of Christmas.

As of today, we have about 25 weeks until Christmas rolls around again. The question is, “Will you be ready”? After the year we’ve had (hello COVID-19, hello looting and protests, hello stock market crash and recession), I really wouldn’t blame anyone for canceling Christmas. But my family is looking forward to it, so I’m gearing up to make it a great one.  If you’re feeling the same way, but want to set yourself up for a debt-free Christmas this year then just keep reading!

6 Tips for a Debt-Free Christmas

1. Set a Christmas gift budget.

This budget is separate from the regular monthly budget that you would create for December expenses. To start your Christmas budget take out a piece of paper and write out the names of every person that you anticipate buying a gift for. Next, assigned a specific dollar amount to each person. 

2. Don’t overlook non-gift purchases, like decorations.

Now is the perfect time to trudge down to your basement or up to your attic and pull out your Christmas decorations to see what may need to be replaced.  You might need a new artificial tree, new outdoor lights, a tree skirt, or new ornaments so take a quick inventory so that you can plan accordingly.

Pro Tip: I always grab Christmas decorations at steep discounts by shopping for them after Christmas. In the week following Christmas, stores are typically in a rush to clear all of their Christmas items from the shelves. And that’s a perfect opportunity to grab wrapping paper, Christmas cards, and other items for as much as 50% off or more. 

3. Factor in additional food during the holiday season.

I don’t know about you but my food budget tends to explode in November and December. The food budget will definitely expand if your hosting holiday parties or dinner at your home. But also during the holiday season we tend to spend more family time together, kids are off from school, and you may have time off from work which leads to more snacks being eaten and more meals cooked in the kitchen. 

4. Factor in the cost of holiday travel.

This tip might not be as relevant for 2020 because of the ongoing COVID-19 pandemic, but ordinarily travel might be a big part of your holiday budget. For example, plane tickets for a family of 5 can be very pricey when traveling out of state to visit family for the holidays. And, a rental car might be necessary as well. Be sure to factor these expenses into your budget. Currently, we live in our home state of Maryland, close to both sides of the family. But when my family lived out of state and away from family, we would travel on alternating years and in between spend the holidays at home on our own. 

5. Shop for gifts year-round. 

There is no rule that says you must wait until November to start Christmas shopping. In fact, you will save more money by shopping for gifts throughout the year. Of course, some people get a thrill from Christmas shopping at the last minute. But I’m certainly not that person. Last-minute Christmas shopping gives me anxiety. For one, I’m in Maryland so it’s always cold outside. Two, I can never find what I’m looking for when I shop last minute. And three, folks are cranky and on edge. A few years back I recall seeing two VERY senior ladies nearly come to blows over a parking spot outside of the Dollar Tree. I parked far away, went in the store, shopped, and when I returned to my car they were still arguing. Not my idea of holiday cheer. 

6. Start a Christmas Sinking Fund.

A sinking fund is a way to incrementally save for a large or irregular expense.  Learn more about sinking funds here. You can opt to create a Christmas cash envelope or open a separate online savings account specifically for Christmas. As of now, Christmas is about 25 weeks away. If you committed to saving $40 every week from now until Christmas you could have $1,000 set aside for your debt-free Christmas!

Have you started saving for Christmas yet? How much money do you typically spend?