#MerryMoney: How To Set a Holiday Spending Limit

This is the second in a three-part series called #MerryMoney, about the different strategies I’m using to keep my holiday spending under control. They aren’t rocket science, and honestly, if you’re a spending-and-saving guru, they might seem totally basic! But if you’re looking for ways to get through the season without having to tap into your TFSA to do it, you’re in the right place.

Even though roping everyone else in to your budget festivities is a stellar strategy, and pretty easy to do once you nail that awkward holiday money chat, there are times when it just won’t work. Maybe you’re not ready to do the heavy lifting of convincing people, or maybe the ship has mostly sailed on people’s gift giving strategies for the year.

Maybe, like Taylor from Freedom from Money, you just really love giving gifts! That’s totally legit, and as much as the personal finance world is all

“stop spending always no seriously stop that,”

if gifting is important to you, don’t worry.

You can still have a budget-friendly Christmas.

Those things – other people’s preferences and your own – might not be the easiest to change in a short time-frame. But you know what you can always change?

Your own holiday spending.

You can take control of how much you spend this Christmas by…

Drum roll please…

Taking control of how much you spend this Christmas. (I know, I’m hilarious.)

I read an article in the Financial Post a week or so ago, that made the argument that raiding your TFSA – a tax-advantaged savings account, for all of my American friends – is a great strategy to pay off your holiday spending on your credit cards.

Which, yes, if you’ve gone into debt on a high-interest credit card to fund the holidays, that’s true. That math checks out.

If that’s your situation, by all means, you’re wise to use your TFSA to pay it off because you’re certainly not earning 19.99% on your investments right now.

But – and here’s a radical idea – you could just not go into debt for the holidays in the first place.

I have to admit, I worked backwards on this, but here’s one fool-proof way to keep your holiday spending in check this year.

#1. First, make a list of all the people you want to give gifts to. Easy.

#2. Then, take a good long look at the list. Ask yourself if there’s anyone you can either suggest a budget-friendly Christmas to, or if there’s anyone who doesn’t need to be on this year’s list. Friends who you haven’t seen all year, but feel like you *should* get something for? Maybe you can send them a nice card instead.

#3. Once you’ve got a final list, set a rough budget. It’s easy – just put down an estimate for what you’ll spend on each person. It doesn’t have to be set in stone, but the difference between a $25 gift and a $75 gift is good to note.

#4. Total up that list. Are you happy with the total? If not, go back and adjust the limits per person.

#5. Do a gut check. When you have a total – and this is important – ask yourself if spending this amount will add stress to your life. That includes not being able to pay it upfront, being worried about paying for your other monthly commitments, or just generally not feeling great about parting with that much money right now.

Lastly, this is important: if spending that amount will put you into debt, don’t spend it. Just don’t do it.

Having this kind of clarity into your planned spending for this year can help you stick to your budget in two distinct ways.

Less Likely To Over-Gift

You won’t be tempted to drastically overspend on any one person. Having this kind of clarity into the cost of your total gift list is the perfect antidote to the “Cousin Sally would L-O-V-E this $450 handbag… I can totally make it work this year. It’s PERFECT for her!” reactions.

I’ve had these reactions, you guys. These are not made up reactions. I don’t know anyone named Sally, but otherwise: true story.

Less Likely To Blow Out Your Budget on Extras

All of your other holiday decisions will be informed by your gift budget. Unless you’re sitting here, totally blissed-out and stress-free because you finished your shopping in November, there’s still a lot of month to go between now and Christmas, and it’s a spendy month to boot. I’ve got several holiday parties, open houses and cookie exchanges between now and the 25th, and it’s easy to get the urge to over-indulge.

“Sure, let’s get a hotel room after the Christmas party! We’ll be downtown anyways!”

“Sure, I’ll make the extra-fancy cookies for this exchange! I only have to bake 10 dozen, how much butter will that really take?”

“Sure, let’s buy them the really great bottle of wine as a hostess gift!”

If you can afford these extra expenses, that’s awesome, and you should enjoy yourself guilt-free. But they’re the kind of expenses that are easy to jump on when you don’t have a clear idea of what your total spending is for the month.

When you know how much your gift budget is going to ring in at – even as a rough estimate – you can plug that into whatever you’re using to track your spending. (Also: you should totally track your spending, for a ton of reasons.) That’ll show you the real impact of your gifting over the holiday season, and whether you can afford those holiday extras that are so easy to add on without even thinking about it.

This is just one way to stick to a gifting budget over the holidays, albeit one that has worked for me, and that comes with two pretty hefty benefits – in addition to not raiding your retirement accounts, obviously.

At the end of the day season, every person who is on your gift list should care enough about you to want you to avoid going into debt just to get them a present. If that isn’t true, maybe they shouldn’t be on your gift list to begin with.

The people who are on your gift list – the ones you really care about, and want to acknowledge this holiday season – will be thrilled just to spend time with you, regardless of what’s “in it for them.” And future you? Well, future you will be gosh-darned ecstatic not to be raiding your retirement savings come January to pay off your holiday debt.

As they say (I’m pretty sure they say this you guys) Christmas is like an airplane emergency. Put on your own oxygen mask first, and don’t go into debt trying to buy oxygen masks for everyone else.

It’s something along those lines anyways.

Some other #merrymoney posts for your reading pleasure, if you’re in the holiday-budgeting spirit:

Do you guys plan out what you’ll be spending ahead of time? Has winging it ever given you any holiday gift-giving horror stories of the budget variety? Lastly, do you have any #merrymoney advice to share? I’d love to hear it!