Did you set a holiday budget this year? Did you stick to that budget? If you answered no to either question, you’re in good company. At this time of year, many of us expect to blow our budgets. But overspending around the holidays can have a much greater impact on the rest of your year than you think. [Also See: Avoid Making These 5 Last Minute Holiday Money Mistakes]

Myron Knodel, financial planning expert at Investors Group, says, “It can really put you behind on your other financial planning objectives.” And everyone has objectives, whether you’re saving for retirement or a new house or a child’s education.

“If you find it’s May or June and you’re still paying off your Christmas debt, it almost causes you to regret the season,” says Knodel. “I think that’s the biggest danger.”

Here are three tips to help you stay on track.

1. Set a realistic budget
The best way to stick to a holiday budget is to set one that reflects your financial situation. Knodel advises thinking beyond dollars and cents. To put your budget into perspective, think in terms of how long it will take you to pay for everything.

Knodel explains, “Think about what you make and how much you have left after you pay your essential costs. Say you take home $1,500 a month, and your expenses are $1,000. That leaves you $500 a month that can be used for your financial planning purposes. If you’re racking up a $2,000 Christmas bill, you’re going to spend four months paying for those expenses, or one-third of the year.”

And remember that it’s not just gifts you’re budgeting for. You’ll need to buy cards and wrapping paper. If you’re entertaining, you’ll have to buy extra groceries. If you’ll be travelling over the holidays, don’t forget to budget for that, as well as any holiday dinners and lunches you’ll be expected to attend. Budget for all of these things, and include some wiggle room for surprises.

2. Revise your budget if needed
If you’re not happy with how long it will take you to pay off your holiday expenses, you may need to revise your budget. You may also want to revise your holiday budget means if it means putting other important financial planning objectives on hold (think about everything from making RRSP/401 contributions to paying for emergency car repairs).

One way to revise your budget is to take a good look at the list of people you’re exchanging gifts with, advises Knodel. Does everyone on that list need to be there? Or are there people you’re exchanging gifts with just because you’ve been doing so for the past decade. Maybe there are a few people on your list who would rather meet up for a coffee at this busy time of year than get a gift.

3. Stick to your budget
Once you’ve got a budget you’re happy with, Knodel offers these tips for sticking to that budget.

  • Make a list – and use it. From gifts to groceries, focus on what you set out to buy. Avoid impulse purchases or items that fall outside of your budget.
  • Pay for as much as you can with cash or by debit card. Racking up debt and interest charges around the holidays can really hinder your other financial goals.
  • Save in advance. It’ll be easier to pay in cash if you start saving early. Try to put aside some funds every week for several months before the holidays.
  • Look for sales. If you’re saving in advance, you’ll find it easier to stock up early on good finds. You might even consider giving a short-term IOU for a big ticket item that you know will come down in price by January.


Danielle Arbuckle

Danielle Arbuckle

Danielle is a freelance writer and editor who has been writing about personal finance and investing for the past 10 years. She has worked for a provincial securities regulator, a bond rating agency and a large Canadian publishing house.