How do I manage the cost of Christmas and big occasions?

Spreading and controlling the cost of predictable annual expenses so they stop arriving as emergencies.

Difficulty: beginner
Time: 45 min
Read: 2 min

Short answer

Christmas, birthdays and holidays are entirely predictable, so set a total budget, divide it by twelve and save monthly into a separate account. Agreeing spending limits with family in advance is more effective than any individual economy.

The cost of Christmas is not a surprise, yet it is routinely treated as one — which is why January is a difficult month for so many households. Treating it as a known annual cost, saved for monthly, removes the problem entirely.

What you'll need

Separate savings account
Last year's spending figures
Gift list (optional)

Step by step

Work out what you actually spent last year, including everything.Gifts, food, drink, travel, decorations, cards, postage. The total is usually higher than the remembered figure.
Set a total budget for this year.One number for the whole occasion, not a series of individual decisions made under pressure.
Divide by twelve and set up a standing order into a separate account.Starting in January means it is fully funded by December and never touches the current account.
Agree limits with family and friends in advance.Most people are relieved. A Secret Santa or an agreed cap is far more effective than each person economising privately.
Make a list with a per-person amount before shopping.Shopping without a list is how budgets are exceeded. The list is the budget.
Buy across the year rather than in December.Spreading purchases avoids peak pricing and the pressure of buying under a deadline.
Track spending against the budget as you go.Otherwise you discover the overspend in January. A note on your phone is enough.
Do the same for birthdays, holidays and other predictable annual costs.The same sinking-fund approach works for anything foreseeable.

Tips

Christmas savings schemes run by retailers are not always protected if the company fails. A separate ordinary savings account carries no such risk.
Agreeing to skip adult gifts is increasingly common and almost always met with relief rather than offence.
Food and drink is frequently a larger share of Christmas spending than gifts, and it is easier to plan than to cut.

Common mistakes

Treating Christmas as an unexpected cost — It happens on the same date every year. Not saving for it is a planning decision rather than bad luck.
Shopping without a list and a per-person amount — Individual decisions made under time pressure reliably exceed the total you would have set.
Using credit to cover it and paying it off through the year — You pay interest on a cost you could have saved for interest-free.

Questions people ask

How much should I budget for Christmas?

There is no right figure — it depends on your income and circumstances. The useful step is deciding a total in advance and saving towards it monthly, rather than discovering the number in January.

How do I suggest spending less to family?

Directly and early, well before anyone starts shopping. Most people are relieved rather than offended, and a Secret Santa or an agreed cap gives everyone permission.