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Frugal Christmas: How To Plan Christmas on a Budget

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Christmas might be the most wonderful time of the year…but it is also a time when a lot of people go into unnecessary debt. If you are struggling with how to have Christmas on a budget, I can help! With my tips and a little pre-planning, it is possible to have a frugal Christmas celebration while keeping your budget intact.

Christmas on a Budget

Believe me, I love Christmas. The lights. The scents. The merriment. It’s magical.

Stress and anxiety – and any resulting debt – however, are not magical…they are misery.

Instead of buying into the idea that you have to overspend to have a merry Christmas, you can celebrate Christmas on a budget. And, trust me, it’s as much – if not more – fun!

Learning how to be frugal at Christmas takes a little effort. Traditions and expectations may need to be adjusted in order to keep your Christmas spending in check and your personal finances on track. The keys to having an affordable Christmas is to make a Xmas budget, plan ahead and prioritize. My frugal ideas for Christmas cover the full range of holiday expenditures – from food to decorations to greeting cards.

Pro Tip: Looking for cheap Christmas present ideas? I share my top tips for cheap Christmas gifts below and even more ideas in my guide to Frugal Christmas Gifts!

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Frugal Christmas Ideas

Being frugal at Christmas doesn’t mean you have to be a Grinch. You can celebrate the holiday and stay on track with your money goals – and I have a few tips on how to pull it off!

When you celebrate Christmas on the cheap, bear in mind that your thoughtfulness will be your biggest commodity. A little time and effort can go a long way when planning Xmas on a budget.

#1 Create a Christmas Budget

In order to escape the holidays without overspending, the first thing you need to do is set your frugal Christmas budget. If you are already operating with a budget in order to meet your financial goals, then budgeting for Christmas won’t be an immense task. However, if you are new to budgeting, you will probably want to set aside an hour or two to complete your Christmas budget.

Why is a Christmas Budget Important?

Setting a Christmas budget is the best way to ensure you celebrate a low-cost Christmas. Like with any budget, if you don’t have a plan for your Christmas money, you will likely come to the end of the holiday season wondering where it all went. Making a budget and tracking your Christmas expenses will help you stay on target and keep you from overspending.

According to statistics, about 30% of people overspend on Christmas when they don’t have a budget – and they spend significantly more than those who do budget.

Based on some stats, the average Christmas budget in the USA is set at about $1000. How much you choose to spend on the holidays, however, is completely up to you! You should set your Christmas budget to an amount that you are comfortable with…and can afford without going into credit card debt.

How To Create a Christmas Budget

To create your holiday budget, take the total sum you want to spend on Christmas and allocate a specific dollar amount for every single holiday related expense.

If you track your expenses or save receipts, it might help to look back at what you spent last year and make adjustments as necessary. Otherwise, you will just have to make a best guess as to how much money to spend on each category.

You can, of course, write your budget on any piece of paper – but if you want something a little more organized, you can use my affordable Christmas Budget Planner Templates.

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When To Start Budgeting for Christmas

I personally think it is best to complete your Frugal Budget for Christmas in January. By including ‘Christmas’ as a line item in your monthly budget and creating a sinking fund for the holiday, you have the whole year to plan and save for Christmas.

In fact, a Sinking Fund is one of the best ways for how to save for Christmas gifts and activities. By saving money each month throughout the year, you won’t have to struggle to come up with Christmas funds in December.

However, if the holidays have snuck up on you (as they tend to do), it’s still not too late to start. Just commit to getting ahead for next year and begin your saving fund the day after Christmas.

Don’t have a monthly budget? Get started with budgeting today! When you subscribe to Positively Frugal, I will send you a FREE Budget Template!

Get Started Now with a Free Budget Worksheet

Christmas Expenses to Include in Your Budget

The key to staying within you spending limits is to plan ahead and include every conceivable Christmas cost into your frugal holiday budget. Some of the essential categories to include in your budget for Christmas are holiday cards, clothing, decorations, tree, dinner, activities and, of course, presents.

I also think it’s best to set a specific Christmas Shopping Budget – and, if you have kids, it may even help to create a Christmas Budget per child.

Below I highlight the most common expenditures and offer cost-saving measures to ensure you celebrate Christmas frugally.

#2 Money Saving Holiday Cards

Christmas cards are a classic holiday tradition – but they can be pricey. The good news is that there are plenty of ways to cut down the cost.

DIY Photo Cards

Photo Christmas cards are fun to give (and receive) – and they don’t have to be expensive! In fact, they often cost less than standard greeting cards. Use a company like Shutterfly, Snapfish or Amazon Prints for professional quality, personalized cards on a budget.

Find an Affordable Photographer

Getting a professional family photograph for your Christmas card is all the rage, but if you are on a budget, it is an easy cost to eliminate. Alternatives to hiring a pro photog are employing a budding student photographer or – even cheaper – asking a friend to take your family photos for free. It is cheapest, however, to skip the photographer altogether and use candid family shots that you take yourself.

Card Delivery

The last time I checked, the price of a single 1st class US stamp was 66 cents, which might be a tad high for your budget depending on how many cards you plan to send. Instead of mailing your holiday cards, save a stamp and hand deliver the ones that you can. You could also consider sending Christmas postcards instead of greeting cards inside envelopes – this will save you 15 cents per stamp.

Of course, you can eliminate all spending on stamps and reduce your cost of holiday cards if you instead opt to send digital greeting cards via email. It’s one of the modern and eco-friendly ways to save money at Christmas.

#3 Affordable Christmas Clothes

Special clothes for Christmas may be another line item you will want to include in your frugal Christmas budget. To be honest, when I adopted an extremely frugal lifestyle, this category was crossed off my list entirely. I make do with what I already own. However, if you are going to spend money on special holiday clothes, I have a few ideas on how to cut costs and save money at Christmas!

Ugly Sweaters

I loved when the Ugly Christmas Sweater trend became a thing. Kris and I spent a fun Saturday morning scouring our local thrift store for fun threads. We scored some excellent finds at incredibly low prices, including Christmas pajama pants for both of us – each only $1! 

However, on a recent Christmastime shopping trip at Target, I saw hideous holiday sweaters on the racks marked at an unfathomable price of $50.

To avoid paying high dollar for an item you will likely only wear a few times, go old school and see what you can find at the thrift store. Alternatively, shop after-Christmas sales for discounted items (for the following year) or even consider swapping with friends so that you can each get a new-to-me item.

Matching Pajamas

It’s so cute to see families all dressed in the same matching duds on Christmas morning…but it isn’t necessarily cheap (and, for that matter, it really isn’t necessary…because are you doing it for you or for the ‘gram?).

Rather than outfitting the family in holiday-themed PJs, consider buying less expensive, plain corresponding pajamas that will be worn all winter long. Or, plan far in advance, and buy Christmas pajamas when they are on sale in January.

Christmas Best Dressed

Getting all dressed up for the holidays – whether for dinner at your parent’s house, Christmas mass or The Nutcracker – is another expense that can drive up your Christmas costs.

Instead of splurging on clothing that can only be worn at the holidays, pick up something neutral that can be worn at subsequent events. Hand me downs, friend swaps and neighborhood exchanges are great for finding holiday clothes for kids, too!

#4 Frugal Christmas Decorations

Decorating for Christmas can put a dent in your budget. With a little creativity, however, you can avoid big costs by sprucing up your home with holiday decorations on a budget.

Limit Your Decorations

It can be tempting to over-decorate your home – but following in the footsteps of Clark W. Griswold is not a budget strategy. Instead, commit to limiting your décor to a few items that will add Christmas cheer to your home.

As digital nomads, we buy new decorations each year on a minimal budget – limiting our expenses on décor to just $20. In most cases, that amount is enough to buy a small tree, a strand of lights, a few ornaments and a scented candle. And, honestly, that is all the frugal Christmas decoration that we need!

Budget Holiday Decorations

There are dozens of ways to score cheap or inexpensive holiday decorations – from sales to second-hand stores to dollar stores to giveaways. A word of caution: the dollar store can be a great resource for money saving Christmas decor, but it can be a rip off, too.

While I was at a dollar store around Christmastime, the person in front of me laid out $87 on holiday decorations! Don’t get swayed into overspending on cheap items that won’t last and add up to a hefty price in the end.

Frugal Christmas Crafts for Decor

Alternatively, create your own DIY Christmas decoration crafts. Favorite holiday kid crafts include paper cut snowflakes and pinecone ornaments – but inexpensive adult crafts, like wine cork reindeer and mason jar snow globes, are just as fun! Get some great ideas and save money on Christmas with the crafts from this list by Reader’s Digest.

Reuse Decorations Year after Year

One of the best frugal Christmas decorating ideas is to invest in classic décor that can be used for many years to come. Don’t buy new lights until the old ones burn out. No need to buy brand new candles until the old ones are completely burnt down. And, if you are fortunate enough to have items passed down through your family, display those even if they are out of style!

#5 Frugal Christmas Tree

A Christmas tree can be one of the biggest costs of decorating for Christmas. While I am not advocating dismissing the classic tradition of a holiday tree, your budget may dictate a little inventiveness – and I have a few low-cost Christmas ideas for your tree.

Live Christmas Trees

I’m a huge fan of buying live trees for Christmas – but, my oh my, are they expensive! There are a few ways to save on costs of a live tree for Christmas, though. If you have a nearby national forest, check to see if they sell Christmas tree permits that allow you to go into the forest and cut down your own tree; permits can cost as little as $5.

Another way to get a great deal on a tree is to inquire at the tree lot or farm about any Charlie Brown Christmas trees…you know, the ones with big holes, crooked trunks and twisted tops. Personally, I think the imperfections add a little character (and so does Charlie Brown).

Artificial Tree

Buying an artificial Christmas tree can be a good investment and help you save money during the holidays in the long run – especially if you intend on using it for several years. Of course, the best time to buy fake trees at the best price is after the holidays, when they are deeply discounted. 

Reusing the same Christmas tree year after year is a great way for how to make Christmas cheaper in the long run.

Create Your Own Tree

On an extremely tight Christmas budget, you can get really innovative and create your own tree. Tack up garland on a wall in the shape of a tree or weave lights into an already existing houseplant. Get creative!

If you are celebrating a family Christmas on a budget and have kids, get them to help. Kids can have a great time creating a tree for Christmas. It might be so much fun, in fact, that it becomes a family Xmas tradition!

#6 Frugal Christmas Menu

Holiday food can derail a budget in a hurry. However, with a meal plan and dedication, you can keep from overspending.

Frugal Christmas Food for Parties

If you are having people over for Christmas dinner or a party, ask your guests to share in the food cost by making it a potluck meal. This not only saves you money, but time and stress, too!

Alternatively, if you are invited to a party that you need to bring a dish to and are adhering to a frugal Christmas budget, then opt to bring an affordable side dish, like roasted in-season veggies or an inexpensive casserole. Steer clear of fancy cheese trays, pre-made goods and pricey meat-based dishes.

Frugal Christmas Dinner

While there are tons of frugal Christmas dinner ideas, it might be cheapest to create a classic Christmas meal. The fixings for the traditional meal – ham, potatoes, green beans and cranberry sauce – are typically discounted at the grocery store in the weeks leading up to the holiday.

I also recommend using frugal Christmas recipes that call for common ingredients. Buying one-off items to complete a Christmas meal will definitely increase your expenditures. Be sure to also read my complete guide to a Budget Christmas Dinner!

Christmas Sweets

Christmas and baking go hand-in-hand…but baking and budget might not. While baking at home is part of most frugal lifestyles, baking specialty holiday treats that use one-off ingredients can be pricey. It’s certainly not a good recipe for how to have a cheap Christmas.

Keep your costs to a minimum by limiting the number of Christmas cookies you bake. Also, commit to making inexpensive treats – like these budget-friendly desserts by Taste of Home.

Interested in more of my Frugal Food Tips? I round them all up (including my favorite Frugal Snacks) on my Frugal Food page!

#7 Budget Christmas Activities

Partaking in some of the classic Christmas activities can drive up the cost of your holiday celebration. A family outing to Zoo Lights, ice skaing with friends and a night at The Nutcracker can all add a significant cost to your Christmas budget.

However, there are many fun Christmas on a Budget ideas that can help to keep your costs in check!

Christmas Lights for Free

Tickets to Christmas light events – at the local zoo or botanical garden – can be extremely expensive…especially when paying for the whole family to attend. Instead of ponying up for entry fees, seek out festively decorated neighborhoods that are completely free to drive or walk through.

Another alternative is to check prices for an annual zoo or garden pass, which typically offers huge savings. Then, make the annual pass one of the family Christmas presents.

Outdoor Winter Fun

While ice skating is a classic Christmas activity, some rinks charge a bundle. Instead of going to the ice skating rink, bundle up and head out for a wintery holiday hike. Or, if you are lucky enough to be in a place where it snows, go outside to build a snowman or have a snowball fight (which is one of my favorite Free Things To Do!)

Christmas at the Theater

Watching a Christmas theater performance is a top holiday activity, but it’s not always affordable. Rather than over spending, get deeply discounted matinee tickets or see if there is a free community production that you can attend instead.

#8 Christmas Presents on a Budget

Presents are a major Christmas budget consideration when you are trying to be frugal. Eliminating gift giving will certainly help keep your budget in check – but it can be tacky to shrug off Christmas gift giving. Therefore, I’m sharing my best Christmas ideas on a budget for gifts.

Seek Alternatives when Christmas Shopping on a Budget

If the weight of buying Christmas gifts is too heavy a burden for your budget, it is best to have conversations with those you exchange gifts with. It’s a great opportunity to come up with some alternative and fun ways to celebrate the Christmas holiday.

Secret Santa, Gift games and spending limits are ideal ways to cut down on holiday gift expenses. Although not a popular idea, you could also opt to nix the gifts and celebrate a non-commercial Christmas – or at least limit presents to one gift per person.

Many couples and families take their Christmas gift savings and put the money toward an experience – like a family trip. Spending money on adventures, rather than ‘things’, is more in line with a frugal lifestyle.

You can find all of my best gift exchange ideas and alternative Christmas traditions in my guide to Gift Giving on a Budget, but I’m sharing a few specific tips.

Cheap Gift Ideas

Presents don’t have to be pricey, but they should be thoughtful. In fact, a less expensive but thoughtful gift will be more appreciated than a pricey one without thought or meaning.

While in hot pursuit of ‘cheap’ Christmas gifts, keep in mind that spending money on an unwanted, thoughtless Christmas gift is likely a waste of your hard earned cash.

On the other hand, while I tend to think that gift cards are exceptionally impersonal, they can sometimes be better than spending money on an unwanted gift.

If you are unsure where to start with ideas for cheap gifts, you can read my dedicated article for Frugal Christmas Gifts. I share affordable Christmas gift ideas for adults, kids and coworkers. If none of those gift ideas hit the mark, then also check out my advice for Shopping On Black Friday and this Frugal Minded-Gift Guide.

The Total Cost of Christmas Gifts

When you make your budget for Xmas, remember to include all of the costs associated with gift giving. Make a line item for wrapping paper and gift bags, as well as shipping costs if you need to mail gifts.

Your Christmas present budget may be the highest cost of your holiday celebration, so make sure you track it closely.

Keeping on Track with Your Christmas Budget

There is no doubt that there are expenses associated with celebrating the holidays – but it is possible to have a Merry Frugal Christmas. The key to Christmas budgeting is to stick to your set limits and commit to not overspending during the holiday season.

Ways to Pay for Christmas

Even when celebrating Christmas on a budget, you may need to come up with some extra money to avoid high credit card bills in January.

If you are making a plan to save money for Christmas, it’s best to get an early start. Set up a Sinking Fund and put money toward the special savings account throughout the year.

Another one of the best ways for how to save for Christmas is to take on a part-time gig or starting a side hustle in the months leading up to the holiday.

You can also get serious about slashing some of your current spending – like not eating out – in order to accumulate savings for Christmas. For more ideas on how you can save for Christmas, use my tips for Ways to Save Money.

Now is also the time to get jump on next year’s holiday. Start by committing to making financial resolutions for the New Year.

Christmas Budget Motivation

If you feel like you need a little motivation (or perhaps a little more convincing) to break the cycle of a overly commercial Christmas, read Unplug the Christmas Machine. Written in the 1990s (so it does feel a bit dated), the book helps to open discussions about paring down spending at Christmas.

Final Words about Christmas on a Budget

The best way to keep your Christmas budget in check is by planning ahead. Save throughout the year for anticipated costs and track your spending on holiday items.

Organizing your holiday expenditures with Christmas Budgeting Worksheets will ensure you keep on track with your Christmas Budget!

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Interested in more of my Budget and Goal Tips? I round them all up on the Budget & Goals page!

I Want To Know: How do you celebrate a frugal Christmas? Give me your best Frugal Christmas Tips in the comments below! Also, check out my tips for a Frugal and Fun Halloween!

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