It’s that time again.  The time of year when all reason seems to fly out the window, and the holiday sales and family obligations threaten to demolish your careful budgeting, and kill your positive financial momentum.  But you can control your budget.  It’s possible.  You just need to plan ahead and stick to your plan!

Step 1: How Much Room Do You Have in Your Budget for Holiday Gifts?

First, examine your finances and figure out how much you have to spend.  Do not let yourself go into debt to buy gifts.  Really.  And don’t play the game of charging it all on your credit cards and deciding that you will figure out a way to pay for it in February.  Figure out what you can afford to spare based on your December income and expenses only.    There is some room for adjustments later, but this is our starting point.

The average person says they are planning to spend about $882 for gifts this year.  That’s a lot of money!  And that’s just what they’re planning to spend.  More often than not, it seems shoppers blow through their expected budgets and end up paying the price in January (and beyond).  You’re not going to let that happen to you.  Pick your total number, and let’s move to step 2.

Step 2: Figure Out Who You Need to Buy For

Next, make a list of everyone on your Christmas list.  (Or Hanukkah, or Kwanzaa, you get the idea.)  Here’s my list, made exceptionally long by the number of divorces and remarriages in my family:
Mom and Stepdad (2)
Sisters (2) and Brother (1), and their spouses/serious significant others (3)
Nieces and nephews (4)
Dad and Stepmom (2)
Stepmom’s daughter, her husband, and children (4)
My boyfriend (1)
Boyfriend’s Mom and Dad (2)
Boyfriend’s Sister and Spouse (2)
Boyfriend’s 94-year-old grandma (aka the sweetest woman who ever lived) (1)

Christmas pets christmas tree reindeer gifts beggars

“Don’t forget about us!” Jeez guys, enough with the sad eyes.

That’s where I cut off my list, at 24 people.  Yikes!  My stepmom’s cousin and her kids usually come to a Christmas gathering, but I just can’t add them on, too.  And sometimes my stepmom’s sister and mother come, too.  If her mother comes, I will usually bring a bottle of champagne for her, because it’s relatively cheap, and she’s the second sweetest woman who ever lived.  But that’s it.

Hopefully your list is shorter.  Anyway, so take your total budget, and start by dividing it evenly by the number of people on your list.  I usually start with a number somewhere around $600.  Do not feel bad if your number is larger or smaller.  Just choose a number you can comfortably afford.  Starting at $600, and dividing by the 24 people on my list, I end up with a budget of around $25 per person.

Step 3: Make Adjustments Between the People

The next step is to start to make some adjustments.  I usually want to spend a little more on my parents, because they have done so much for me that I really feel grateful, and I want to show my appreciation.  So I normally double the amount I will spend on each of them, to $50.  Here’s the key, though: you can’t allocate extra money to them without taking away money somewhere else.  So here’s where I start shaving from the people who are a little lower in priority on the list.  Maybe the niece and nephew gifts get shaved a little, or maybe instead of spending $25 each on my stepmom’s daughter, her husband, and her two kids, I might do a family gift for them worth about $50 total instead of $100.  To give to one, you have to take away from another.

What if You Find Something Super Cool that’s Outside of Your Budget?

Here’s where mental fortitude comes in.  You have to make a pact with yourself now, before you’ve started shopping, that you will not go over budget on any one person without going under budget on some other person, to make your total stick.  You can do it.  If you find the perfect item for someone that’s $35, but you can’t pass it up, then you have to shave one person down to $15.  Start checking bargain bins for good values, or buy something great on Craigslist that is lightly used, but still a great present.  If you really try, you can make it work.

What if Your Allocation Per Person is Just Too Small?

Let’s say your family is even worse than mine, and you have fifty people you need to buy for, and you can only spend $200 on Christmas.  You can make that work, I promise.  For $4 per person, I know it looks like you can only afford a votive candle for each person on your list, but there are ways to give yourself some wiggle room:

1.  Prioritize your list, and try to whittle it down some.  If your list is really 50 people long, you might need to make some harder choices.
2.  Bake some cookies, or do some knitting, or decoupage some fancy coasters using scrap tiles and nice paper.  There are always some homemade gifts that you can make for some of the people on your list that will take some of the pressure off your budget for the rest of the people on your list.  Side note: sometimes craft projects can get very expensive if you’re buying a bunch of supplies you don’t already own.  The key to rein in your budget on that is volume.  Don’t spend $20 on supplies for making coasters and make one set for one person.  And don’t even try to justify the additional expense to yourself by rationalizing that you’re spending that extra money but you get to keep the supplies to make some for yourself later.  (Nice try, sneaky brain!)  Instead, commit to making 3 or 4 or 10 sets of coasters, to divvy up the cost of supplies by that number of gift recipients.
3.  Coordinate a white elephant gift exchange (official rules here), or a secret Santa, or some other system where each person has a pre-defined budget and an obligation to buy only ONE gift.  If you have enough people in the group, you can even set a higher dollar limit, so the gift might be really good!  Imagine you have your list of 50 people, but 20 of them are within this group.  Instead of buying 20 presents at $4 each, you could allocate $80 to one present that someone might actually want.  Or if you need more room in your budget for the rest of the people on your list, you could set the limit for the group gift to $40, and give yourself an extra $40 to allocate among the remaining people on your list.

Worst Case Scenario—Shift a Small Portion of the Cost into January

This option is not for you if you have any credit card balance at all that you carry from month to month.  If that describes you, then stop reading here, stick to your budget no matter what, and resolve that by next year at Christmas time, you will have either wiped out your credit card debt or at least made a sizeable dent in it.  That’s your next year’s Christmas gift to yourself.

For the remaining 66% of you who do not carry credit card debt, you have a little more flexibility, but you need to employ this emergency scenario only if it really feels impossible for you to do Christmas on the budget laid out above.  Figure out how much more you feel like you need to spend, and then figure out whether you can afford to pay that additional amount by the time your credit card bill arrives in January.  If you can swing that, then okay, but take a second look at your Christmas list and budget first and consider trimming back your gift-buying expectations instead, because you don’t want to cut back on your retirement planning or investing just for the sake of a little annual consumerism.

What’s your plan for surviving the holiday shopping season?