How To Have A Debt-Free Christmas

By Zach Buchenau

Last Updated: December 28, 2020

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It’s that time of year again; the flowers are blooming, the grass is turning green, and people all over the world are wanting to know how to have a debt-free Christmas.

Wait, what?

I realize that Spring is a weird time of year to be talking about the holiday season. But if you want to have a debt-free Christmas, it’s time to start planning–and more importantly–start saving.

If you’re like me, you’ve experienced the financial stress that seems to accompany the Christmas season. Whether it’s the holiday parties, gift giving, or travel expenses, there’s an opportunity to throw money on a credit card at every turn. And to make things worse, we are bombarded with an endless stream of ads, offering financing incentives for everything on our adult Christmas lists.

It all makes for a really fun December. But when that harsh reality named January comes with a mailbox full of bills, you get to experience something a little more sobering… debt repayment, and buyer’s remorse.

But there’s another way–a better way–and it starts long before December. In fact, I would go as far as saying it starts in January.

So, break out the Figgy Pudding–whatever that is–and get ready for some of my favorite tips on how to have a debt-free Christmas.

Related Post: 10 Inspiring Books To Read While Getting Out Of Debt

How to have a debt free Christmas this year. These tips will help you save up to pay cash and avoid debt this Christmas. #debtfreechristmas #debtfree #merrychristmas #christmasbudget

Focus on Jesus

If you are reading this post, I am assuming 2 things: you celebrate Christmas because you believe in God, and you also don’t like debt.

So, with that in mind, and before we get too far down the ‘debt-free Christmas’ path, I think it’s important to focus our attention on the true reason for the season: Jesus.

After all, Christmas wouldn’t exist without the little bundle of peace and joy that God sent down to be our savior. And let’s be clear, the true reason we celebrate Christmas is because a baby was born that would grow up to save us from our own sins.

But how does this have any relation to personal finance?

Well, by focusing on Jesus, and the purpose he was born to fulfill, our attention shifts away from material things, and moves toward the wisdom and insight of The Holy Spirit.
And when that happens, the path to handling money in a wise and debt-free manner becomes extremely clear.

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Decide How Much You Want To Spend

If you want to avoid debt this Christmas, you need to decide exactly how much money you are willing to part with. Then, you can divide it by the number of months between now and December 1st to know exactly how much you need to save every month.

This might seem pretty obvious, but very few people actually do it.

It is important to note that you don’t want to be reaching your goal at the end of the year. The goal is to have every penny saved up before December starts. For example, since it’s May, if I decided to spend a total of $1,000 this Christmas, I would need to save $142 every month for the next 7 months (May – November).

If you make the mistake of including December in your calculation, you will end up a little short, and that could lead to debt.

Budget for Gifts

If you are going to give gifts at Christmas, you obviously need to decide who you will be giving them to. But this is easier said than done. So, to develop a good Christmas gift budget, I recommend you grab a sheet of paper, and separate it into 3 categories: Big Gifts, Medium Gifts and Small Gifts.

In the Big Gifts category, I want you to write down the names of your immediate family and best friends. This is a very exclusive group, and therefore, it shouldn’t have many people in it. You should dedicate 75% of your gift budget to these people.

The Medium Gifts category is reserved for close friends and extended family that you spend consistent time with year-round. These are the people that you usually exchange gifts with right around Christmas, but you don’t actually spend time with them on Christmas day. You should dedicate 20% of your gift budget to these people.

The Small Gifts category is reserved for co-workers and people you don’t consistently see. This is where a simple card, or a $5 Starbucks card is a good option. You should dedicate 5% of your gift budget to these people.

Budget for Food and Parties

When you think of Christmas spending, the first thing that probably pops into your mind is gifts. Though, one of the easiest–and most overlooked–ways to fall prey to debt, is actually to overspend on food and parties.

It’s hard to see the big picture when you’re in the Christmas spirit, but when you add up a few bottles of wine, a couple desserts, and a few gift exchanges under $25, what you get is a Christmas surprise.

“Surprise, you just blew through half of your budget!”

So, if you really want to be financially prepared for Christmas this year, plan on saving some money for things like alcohol, white elephant gifts and food. These things will sneak up on you in December if you aren’t careful. And that might lead to debt.

Related Post: How To Stop Wasting Money On: Food, Clothes, Travel, Home and More!

Budget For Travel

Holiday travel is an exceptionally easy way to find yourself in debt. So, if you want to avoid it, you need to create a strict travel budget as early in the year as possible.

Planning and budgeting for Christmas travel well in advance will give you plenty of time to save for your trip, and shop for the low priced plane tickets. This way, when all the world is spending money out of desperation, on over-priced flights, you will be sitting pretty with 2 beautiful things: inexpensive plane tickets, and money in the bank.

Remember, when you combine procrastination and spending money, the result is almost alway going to be debt. So set yourself up for success, and implement a holiday travel budget.

Don’t Base Your Spending On What Other People Spend On You

If this sounds familiar, and you want to stay out of debt this year, you need to abandon this way of thinking. It is a financial trap.

Don’t confuse debt with generosity. Generosity is about giving to someone within the boundaries of your financial ability; not spending money that isn’t yours.

Plus, the people that really care about you, wouldn’t want you to sacrifice your financial future by going into debt to give them an extravagant gift.

Don’t overspend on somebody because they overspent on you. That is not what Christmas is about. Giving is not a competition.

Cut Up Your Credit Cards

If you were trying to lose weight for a vacation, it would be a terrible idea to bring ice cream and cookies with you everywhere you went. So, it stands to reason that if you don’t want to go into debt, you shouldn’t bring credit cards with you either.

If you are serious about not going into debt this Christmas, cut up your credit cards. It’s really that simple.

Related Post: Credit Card or Debit Card: Which Should You Avoid?

Shop For Gifts Early… And I Mean Really Early

One of the best parts about planning and saving for Christmas early, is that you get the opportunity to take advantage of some of the best sales of the year.

I’m not talking about Black Friday. I’m talking about Memorial Day, 4th of July, Labor Day and other holiday sales throughout the year. I mean, have you ever considered buying Christmas gifts in May, June or July? Dare I say January?

You will be amazed how much further you can stretch your Christmas money by shopping for gifts earlier in the year. As an added bonus, you won’t have to deal with the stress of last minute shopping either.

The Bottom Line

Christmas is the season of giving, not the season of debt. You don’t need to go out and buy a new car, or max out your credit cards. What you need, is to start planning early, and focus on what’s truly important.

Don’t be the person that celebrates Christmas on a credit card, then spends months paying it off. Instead, be the person that prepared and saved up enough cash, well in advance, for the entire holiday season. Be the person that gives generously, without spending unwisely. And finally, be the person that wakes up on December 26th, without a penny of debt, or an ounce of buyers remorse.

The only thing you will regret, is that third helping of Figgy Pudding you ate. Though, I’m still not quite sure what that is.

Are you paying off debt using the debt snowball method? If so, check out our Free Debt Snowball Calculator to discover how long it will take you to get out of debt!

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Zach Buchenau

About The Author:

Zach Buchenau is a self-proclaimed personal finance nerd. When he isn't writing about budgeting, getting out of debt, making extra money, and living a frugal life, you can find him building furniture, fly fishing, or developing websites. He is the co-founder of BeTheBudget, and Chipotle's most loyal customer.

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