How to Plan for a Debt Free Christmas

Christmas is a wonderful season of giving and wonder, but the truth is, the season can leave many people in financial trouble because they don’t know how to prepare for it and end up charging everything to credit cards that haunt them well into the next year. But with planning, budgeting, and committing to pay cash for everything, you can choose to have a stress-free Christmas this year (or at least, stress-free financially!).

Regardless of what your budget is for Christmas, the important part is to start planning for it early and to track what you spend so you don’t go over budget. Your Christmas Budget is going to be a branch off from your regular monthly budget. If you haven’t started budgeting monthly, read these posts first:

How to Plan for a Debt Free Christmas


First, you need to calculate how much money you need to spend at Christmas. This amount will become your savings goal so you have the cash saved up ahead of time and won’t fall trap to charging Christmas to your credit cards. To figure out the total amount, you need to think about all the categories you will be spending in for Christmas.

  • Make a list of everyone you need to give a gift to (family, friends, and don’t forget teachers, co-workers, etc). Write down how much you plan to spend for each person.

  • Determine an amount you think you might need for Christmas festivities such as party foods, pictures with Santa, etc. Any expenses for events you might go to should be included.

  • Plan for traveling if you go to visit family this time of year. This could include gas, lodging, extra food, etc.

  • Consider if you need to set aside an amount for other expenses like Christmas cards, a tree, extra groceries, etc.

  • Make a list of organizations you plan to give to during the season (you can do this all year long, but if you know you’re going to give extra at Christmas, plan for it).

  • Set aside an extra “miscellaneous” amount for some cushion. It doesn’t have to be much, but in my experience there’s always someone to buy a gift for last minute or a school party I didn’t plan for, etc.

Total up everything on the list you just made and you now have a starting point for your Christmas budget savings goal. But before we put that number into the monthly budget…


Christmas is a season that can cause everyone to be a little more care-free with spending and there’s good and bad with that. But, if you’re wanting to walk in financial freedom, you need to make sure you’re spending money on what’s important. Especially if you are currently in debt, you need to re-evaluate the list you made in step one and try to reduce your spending. If there’s a White Elephant Gift Exchange at work that you can opt out of, do that. Go with the inexpensive Christmas cards (or no cards at all). And look at your list of people to buy gifts for and see if you can reduce the budget for each person to a reasonable amount.

Now we’re not trying to be stingy here, but if there’s a third cousin or someone on the list that would probably be just fine with just a card this year, then do that. It may even be time to have an open conversation with your family and loved ones about cutting back. Are you giving just to give? Is everyone secretly wishing to cut back? Have a clear conversation about it and consider swapping out gift giving for a shared meal and stocking stuffers (or no stocking stuffers). Quality time together can be just as much of a gift. And if you find that everyone was giving just to give, consider making a meaningful group donation to a good cause instead. Cutting back on spending doesn’t have to mean cutting back on generosity.

Related: 16 Ways to Save Money At Christmas


Once you have made your spending list and cut back on an unnecessary spending, use that total as your savings goal. Dividing the savings goal by however many months are left until Christmas (or until you need the money available). So for example, let’s say I want to save $700 for Christmas, it’s almost August, and I want to have the money saved by November so I can buy everything ahead of time. I have 4 months to save $700 so I need to save $175 each month. The $175 is how much I will budget for my Christmas Sinking Fund each month (a sinking fund is basically another word for a savings category within your budget).

Now, you can see where there are advantages to starting to plan and save early! If you save for a $700 Christmas all year long, you only need to save about $60 each month. Even if it’s February and you’re not sure what all your Christmas expenses are going to be, estimate a minimum amount you think you need to save and set aside some money for that each month. Then, closer to Christmas, you can re-evaluate the budget and figure out how much more you need to be setting aside each month or if you’re right on track.

Christmas should be a time of joy, generosity, and remembrance of our Savior’s birth. Too often we get caught up in the spending, purchasing, busyness, and therefore stressfulness. I encourage you to just take some time to plan ahead so you can reduce your stress. Then use the tips I’ve given you for saving money this Christmas and making it less about spending. Make a commitment to put your priorities in order. Don’t let Christmas send you spiraling back into debt, or more into debt thank you already are. Your future and your family’s future are more important than the hottest new gifts and gadgets. And as I’ve said with everything else, these sacrifices only need to be short term. When all the debt is gone and you’ve reached financial freedom, think about how many ways you can give during this season?! Now that’s exciting.