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​The Importance of a Holiday Budget

It’s the most wonderful time of the year. Between food and family there are many things to be happy about. However, it’s important to focus on your financial wellbeing during the holiday season as well. You’ve worked hard all year to save and budget, only to have the most difficult challenge face you at the end, and that is holiday spending. For many, that means putting it on a credit card and worrying about it later, but that only extends the problem.

During the holiday season, having a budget is even more important because you don’t want a few weeks of spending to destroy a year’s worth of solid budgeting.


The first reason to have a holiday budget is the structure it can give your finances. Typically people spend using their savings, incoming cash flow, and credit cards. Without a plan in place, reckless spending is more likely to occur and this can cripple your finances.

To implement structure, take stock of your overall savings for the holiday season and allocate those funds – but only these funds – as you see fit. Doing so not only helps you spend only what you have, but also gives you peace of mind when spending.

Prevent Debt

The second reason to have a holiday budget is that it helps prevent you from going into debt – or further into debt. Credit card companies and stores make it extremely easy for you to obtain a credit card. Not only that, the likelihood that you will return to a store increases when you open a credit account there.

Creating a holiday budget outlines what you are able to spend. Having a high credit card limit means you can spend and not feel the pain of losing the money (until later). Having a cash-only budget, on the other hand, will reduce financial stress.

Cash Is King

Using cash and only cash emphasizes the structure of your budget and prevents debt. When you have structure in your budget, you know what you can spend. Combining a good budget with using cash only gives you a greater chance of staying on track.

When you shop, take with you only as much cash as you want to spend. If you only have $50 in cash, you are only able to spend $50 and nothing more. You can use a system of cash envelopes, labelling them for the individuals you have on your gift shopping list. If you know you’re only shopping for three people on a particular day, take only those allotments of cash with you. Try this method and you’ll be surprised at the results.

Overall, the importance of having a holiday budget cannot be stressed enough. If you find yourself struggling to budget throughout the year here are a few tips:

  • Open a holiday savings account. This will allow you to put money away throughout the year and will give you an incentive to grow the account. Typically there are limitations on when you can withdraw funds without penalty, which also motivates you to retain your money.
  • Use a sinking fund. A sinking fund is when you take small amounts of money and save them over a period of time. Keep an envelope stashed away and put cash in it throughout the year. Small savings over long periods can work magic on your budget.
  • Automate the savings process. When you automate the savings process, you limit the time you have to spend the money. Set up simple deposits into a savings account and use that money only for holiday shopping.

Don’t let the holiday season ruin your financial progress. Stick to the structure of your budget, don’t go into debt to purchase gifts, and use cash when possible. If you take these steps you will position yourself well to survive the holiday spending frenzy.

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