Tips to Make a Holiday Budget | Discover Personal Loans

1. Review last year’s holiday expenses

Your holiday budget should incorporate your regular monthly budget, plus take into consideration what you spent last year during the season. You might not have all your receipts, but reviewing your credit card bills, bank statements, or past orders can help you identify how much you spent and on what.

2. Plan how much to spend

After you know what you spent during the holidays last year, think about what you might want to do differently this year. A realistic holiday budget takes last year’s holiday expenses and this year’s needs into consideration.

Consider whether your financial situation has changed. Has your household income increased or decreased? Did you move to a larger home that might need different decorations? Have there been new additions to your family that add to your gift-giving list?

3. Categorize your holiday expenses

Your holiday spending may be about more than gifts. When you review how you spent money during last year’s festive season and consider your budget for this year, you should be able to group your expected holiday costs into categories. Then you can set a spending limit for each, which can make it easier to align your total spending to your budget.

To help you get started, here are some common holiday expense categories:

Gifts

Gift giving might be the most expensive part of the holidays. The National Retail Federation’s annual consumer survey shows that Americans plan to spend around $630 on holiday gifts. While this is down a bit from 2024, it’s still a signficant portion of many people’s holiday or seasonal spending.¹

To start your gift budget, list everyone you plan to give gifts to this year. Keep in mind that your gift list might extend beyond family and friends. It could also include your children’s teachers, your secret Santa exchange at work, your mail carrier, dry cleaner, and others. And remember, even homemade gifts may cost money if you don’t already have the supplies.

Go through the list, write what you might give each person, and estimate your costs. Don’t forget to include wrapping supplies, and any shipping or postage. This will help you budget for your “Gifts” expense category.

Photos and Cards

If you like to send holiday photos and cards, planning ahead can help you save on costs. Look for seasonal sales from online printing services, buy holiday card sets at a markdown in the off season, or limit the number of people on your mailing list.

To cut out the cost of printing and postage entirely, consider sending out digital photos or e-cards. Some of these services charge for their templates, so look for free options or even just send from your own email. You might even donate a portion of your savings to charity after choosing this environmentally friendly alternative.

Food and Entertainment

If you love to celebrate the holiday season with good food and fun events, make sure you pay attention to your “Food and Entertainment” spending category.

Your food-related expenses could include everything you need for a special meal at home, a dish for a company party, or the ingredients to bake holiday cookies with the kids. Or it may mean dining out.

Costs for entertainment might include tickets for seasonal theater, concerts, your annual holiday party, or outdoor excursions. Even office parties can sometimes lead to extra holiday expenses.

Clothes

Whether you’re buying new clothes for a holiday dinner at your favorite restaurant, outfits for children to wear at celebrations, or warm boots for a sleigh ride, clothing can be a big expense for any holiday. List out the events you have planned, as well as others that might come up, and note what clothes you already have or may need to buy for the occasions.

Travel

Holiday travel is known for being expensive. Whether you fly across the country to be home for the holidays or take your family on a winter getaway, vacation travel costs could be a pricey item in your budget. Try to book your travel early, look for cheaper options (indirect flights, renting a car, or taking the train), and try to pack food or use grocery stores instead of eating at restaurants to save on costs.

Decorations

The festive look of a home can be one of the best parts of the holiday season, but decoration costs can add up quickly. Lights, wreaths, electric candles, a tree…it’s easy to exceed your budget. To cut costs, check thrift stores and fall garage sales for gently used, fun decorations. Or look online for inspiration and instructions to make your own.

Donations

If you want to donate money to charity during the holidays, your budget can help you decide how much you can afford. To maximize your giving, check whether your employer matches donations during the holiday season.

If you can’t afford to make a cash donation to a charity, you might consider donating clothes or volunteering to give without spending. And if charitable giving is very important to you, review your other spending categories and see if there are places that you can reduce those expenses—or even incorporate charitable giving into them. For example, are there people on your gift list who would appreciate a donation being made in their name? You can also tell your family and friends that you don’t want to receive gifts this year but would rather they donate to a charity of your choice.

4. Start planning and saving early

The earlier you begin a holiday fund, the better. You can create a “sinking fund” (an account that you create for a specific purpose) by setting up a separate savings account dedicated to the holidays. Use your holiday budget to calculate how much money you want to put aside each month to meet your anticipated expenses and set this as your savings goal. You can even set up automatic deposits so that a portion of each paycheck goes into the fund.

5. Shop for gifts throughout the year

Your holiday shopping doesn’t have to wait until the last minute. Take advantage of sales throughout the year to get the best deals on gifts well ahead of time—you don’t have to wait for Black Friday or Cyber Monday to get great discounts on hot gifts.

A major benefit of year-round shopping is that it helps spread out your holiday spending. This can reduce the financial strain of making many purchases in a short period of time. (Remember: you still want to stick to your holiday budget, so it’s a good idea to track this year’s holiday costs in a spreadsheet or a budgeting app. This can help you manage your spending and help with next year’s budget planning.)

6. Look for other holiday savings opportunities

There are many other ways you could reduce your overall spending for the holidays. You can gift or regift unopened packages, cut back on your guest list for holiday parties, or host a potluck-style gathering. If you’re crafty, you might give homemade gifts – think of jams and pickles, knitted or crocheted items, framed family photographs, and other thoughtful, personal gifts. If you have a big family or a group of friends, you could plan a secret or random gift exchange to limit the number of presents you need to buy. It could also be wise not to shop for yourself until January, when you can take advantage of post-holiday sales.

7. Build in a financial cushion for unexpected expenses

Remember, surprise or emergency expenses can often pop up during the holiday season. Like that family member who shows up for a surprise visit, a last-minute gift for someone not on your list, or having to pay for express shipping.

Leave some wiggle room in your budget, or add a category for “Just in Case” costs. In the end, you may end up with extra money, but that’s great news. (You could get a head start on next year by putting the leftover money into a sinking fund that’s dedicated to your next holiday budget.)

8. Plan how to pay for holiday expenses

When it comes to paying those holiday bills, you have several choices. The key is choosing the right one for your situation.

Savings

If you’ve set a savings goal that aligns to your holiday budget and you’ve put money aside in a dedicated holiday fund, you can use these savings to pay for some or all of your holiday expenses.

Credit card

You could place holiday expenses on your credit card. The exact amount you can spend on your credit card will depend on your credit limit and your current balance. Keep in mind that credit cards have variable interest rates, so if rates increase, you could end up paying more. They are also a form of revolving credit, so your balance may grow if you use the card for post-holiday expenses. As you weigh this choice, consider if you can pay the balance off quickly so you don’t end up paying a lot in interest.

Buy now, pay later

To make a holiday purchase, you might take advantage of a buy now, pay later (BNPL) plan. This option allows you to make a partial payment at the time of purchase and then pay off the remaining balance over a short period, typically in four installments over six weeks. Not all retailers offer these plans, however, and the funds can only be used for the item you’re buying. Be sure you understand terms and agreements, including any fees or penalties, before you use BNPL.

Personal loan

Holiday loans are another option that might help you during the season. Using a personal loan may give you the funds you need for any holiday purchases, from decorations to gifts for the family to a dream trip abroad for New Year’s Eve.

A personal loan is a type of installment loan, which mean you pay it back in set regular monthly payments , and you’ll know precisely when the loan is due to be paid off. At Discover® Personal Loans, you can design your loan around your financial situation. Pick the amount you need and the repayment term from options offered to fit your budget.

After all your planning, enjoy the seasonal cheer

The holidays are meant to be a joyous time of celebration, with time to spend with loved ones. By carefully planning your overall budget and how to pay your holiday expenses, you have the chance to reduce your financial stress and make the most of the season.

If you’re interested in learning more, you can use our personal loan calculator to estimate your monthly payments based on loan amount, your credit score, and the repayment term of your loan.

¹ https://nrf.com/media-center/press-releases/consumers-to-spend-second-highest-amount-on-record-according-to-nrf-holiday-survey