Simple steps to help you plan a Christmas budget

This simple guide will help you to create a Christmas budget so you can keep track of your Christmas spending

A pink piggy bank wearing a red Santa hat sits on a table with Christmas decorations lying around it

After the last few years, you’d probably love to celebrate with a fantastically festive Christmas. But it’s important not to overspend, however strong the urge to splurge.

Budget planning might not seem like the most festive subject to talk about, but there’s nothing festive about opening a huge credit card bill in January either. Without a budget and a plan, it’s all too easy to lose track of your purchases. Before you know it, you’ve spent too much and you’ve got no idea where all the money has gone.

Ideally you’ve been planning a Christmas budget from the start of the year and putting aside money as you go. But we don’t live in an ideal world and there’s a good chance that you don’t have Christmas savings to fall back on. So let’s get the budget planning stage out of the way as early as possible, and then you can get on with all the fun parts of Christmas planning .

This guide will take you through the steps to create a Christmas budget that you can easily stick to.

Why is a Christmas budget important?

There are so many things to spend your money on over the Christmas season: parties, presents, food and drink, supporting charities…

But unless you won the lottery this year, chances are that you can’t afford to do it all. So you will need to make some decisions about which Christmas spending takes priority. 

Your budget for Christmas is an essential tool that will help you plan exactly where you’re going to spend your money over the festive season. It will help you keep track of your purchases and avoid overspending. It will also make sure that you don’t miss anything out when things get hectic.

And budgeting for Christmas separately will stop you from spending money that should be sidelined for essential outgoings. This is particularly important if you’re on a frugal Christmas budget.

A pink china piggy bank wearing a red scarf and Santa hat. There are Christmas presents around it, and text reading 'Click here for Christmas Money Saving Tips'

How will you pay for Christmas?

Your first task is to work out how much you can afford to spend on Christmas and how you are going to pay for it. 

If you’re planning a budget at the start of the year, you can do this the other way around – work out how much you need and then decide how to save that much. But at this stage of the game, you really need to cut your cloth according to your finances.

So take a little while to work out your financial position. If you have been able to put money aside to save for Christmas, that is your starting point. Then you can decide how much you can afford to add to this and if there are any places you can cut back to increase the size of your Christmas budget.

Your final option is to borrow money to pay for Christmas but if you decide to do this, look carefully at the cost implications. It’s better to reduce the size of your Christmas celebrations than to take on debt that you can’t afford.

A hand in a winter sweater holds pen and writes Christmas plans in a spiral notebook. There is a red star and a green mug of tea and lemon near by

Creating a Christmas Budget

Once you’ve decided how much you can afford to spend on Christmas, you are ready to create a Christmas budget. This doesn’t need to be a complicated process and you can prepare your budget in a notebook or on a spreadsheet, whichever suits you best.

Your first step is to make a list of all the things you need to spend on at Christmas. This should only include things that are Christmas-related and not part of your regular monthly budget. 

You can split your expenditure into categories such as:

  • Gifts and cards
  • Food and drink
  • Decorations
  • Everything else

Gifts and cards

Let’s start off with one of the most expensive parts of Christmas – presents and cards. 

Make a list of all the people that you’d like to buy a gift for this year. If you need to economise this Christmas, this will be one of the key places to make some cuts. Do you really need to buy a gift for everyone?

There may be some people who you can agree not to swap gifts with, or others that will be happy to join in with a Secret Santa. Other people might agree to a price limit for gifts to help keep your Christmas present budget down.

Once you’ve nailed down your Christmas gift plans, you can do the same for Christmas cards. Decide who you need to buy (or make) a special card for, who will get a card from a selection box and who will just get a cheery ‘Merry Christmas’ next time you see them.

You’ll also need to include things like gift wrapping paper, gift bags, tags and ribbons. And don’t forget the sticky tape!

Food and Drink

The next area to plan is your food and drink budget. Obviously you need to include everything that you’ll serve on Christmas day, or your share of the bill if you’re opting to eat Christmas dinner in a restaurant or splitting the cost with another family. 

But you need to include more than that if your Christmas budgeting is going to be accurate. Make sure to include everything from Christmas Day breakfast and Boxing Day buffet to the fizz for toasting the New Year.

And don’t miss out all of those little bits you’ll need in between as well. Those biscuits and snacks to nibble on all need to be budgeted for!


Hopefully you managed to pick up some bargains in the post-Christmas sales last year. But your Christmas budgeting might need to cover replacing decorations or buying new baubles or lights for the tree. 

If you’re planning to decorate an area of your house for the first time or want to make some Christmas decorations of your own, don’t forget to add these items into your budget. And of course, if you prefer a natural Christmas tree, that needs to go in the budget as well.

Everything Else

The final section of your Xmas budget covers everything from Advent calendars and Christmas pyjamas to the Christmas pantomime. And don’t forget the little details – as well as panto tickets, you’ll probably want to buy drinks and ice cream. 

Basically, anything else related to Christmas goes in this section. This is really important because it’s very easy to keep on buying little treats throughout the festive season ‘because it’s Christmas’. All those little costs can quickly mount up.

Happy young woman writing a list of Christmas purchases in a notebook, bags of Christmas shopping are nearby

Add a cost against everything

Once you have written down all of the items under each of the sections, check to make sure that you’ve really covered everything. For instance, have you included stamps for posting your Christmas cards or boxes for the cookies you plan to bake as Christmas gifts?

When you have every single detail listed, go back through once more and add in costs against each item. You might be able to look back at last year’s costs or you may have to do some research. Use estimates if you have to, but make sure that they’re realistic – you’re only kidding yourself if you underestimate the cost of Christmas.

Now you’re ready to look at the total and see how it matches against the amount that you decided you could spend on Christmas. If your projected costs are lower than your budget, then you can go right ahead and start planning a fabulous festive season.

What if your costs are higher than your budget?

But if like most of us, your costs are looking higher than your budget, it’s time to start trimming.

Take a moment to really examine your costings. You’ll need to make some cutbacks, so prioritise your costs and work out what is really important for your Christmas. 

Mark each item on your list so that it falls into one of three categories.

  • Things you can’t bear to cut out
  • Things you can live without
  • Things you’re not sure about

Add up the cost of the things that you can’t live without. Does that fall within your budget? If it does, that’s great – you can start to introduce some of the items from the other categories to find out what you can afford.

If your budget won’t cover everything that you really want to buy, you have some trimming to do.

A middle-aged woman sitting at a table, looking at a laptop and making notes in a notepad

How to trim your Christmas Budget

For instance, you are sure to want to buy Christmas gifts for your close family, but what about neighbours or work colleagues. Could they be trimmed from the list or can you reduce the amount you’re planning to spend? Can you reduce your budget on Christmas food and do you really need to buy those Christmas pyjamas for the whole family?

Or maybe there are ways that you can boost your finances to make paying for Christmas easier? Perhaps you have some gift cards tucked away or could earn some extra money by selling unwanted items online. You’ll find more tips for boosting your Christmas budget here.

Planning a Christmas budget is never going to be a fun job. But making these decisions now will make your Christmas shopping choices simpler and reduce the risk of overspending. And that’s the best way to enjoy a truly Merry Christmas!