Whether you are giving gifts to everyone you know or just to your immediate family, holiday expenses can add up quickly. If you don’t set a gift budget AND stick to it, you may be paying for all that joy well into 2013!

Budget form

Dave Ramsey, the founder of Financial Peace University, is offering a free 2012 Christmas Budget form HERE It has columns for you to enter how much you plan to spend and how much you actually spent. It’s a great way to very clearly see how much you have left over or how much you have overspent on gifts. You can print out the form and fill in the blanks using a pencil or use the online form and type in your numbers. If you use the online form, it will automatically add up your totals for you. You could also create the same type of form on Excel if you prefer.

The key is to make sure you are adjusting your spending if you see that you have started to overspend. For many people, a cash system works best. Only take the cash you plan to spend and don’t charge anything. The financial “experts” have said that people who use their credit cards spend 30% more than people who pay with cash. Obviously that is not true for everyone, but if you have the tendency to overspend when you pay with plastic, stick to cash.

Our holiday gift budget

In our family, we have agreed to buy gifts for just the kids including the cousins, nieces and nephews. Our agreed upon budget is $10 per child. Most of the kids on the list (tweens and teens) prefer gift cards so I’ll be looking for some good gift card promotions to score an extra bonus when I buy the gift cards. Gift cards are also great to give to out-of-town family because they cost very little to send (cost of a stamp) versus a mailing a gift that requires a box (usually $5 or more per package). And you don’t have to wait in the long lines at the post office to mail a card. The adults do not buy gifts for each other although I do buy gifts for my dad and mother-in-law. We usually bake for the other adults including family and friends. Baking ingredients also cost money so I add that into the budget.

Each of my 2 girls gets to pick one “big” (ie: more expensive) gift and then they get a number of smaller items I have been stashing away since January. Now I just have to find where I have hidden everything! This year, my oldest requested a pair of Ugg boots that run $150 (ouch!). Her feet have not grown for about 2 years and they are very warm boots so I was actually pleased that she picked such a practical gift. She has been asking for these boots for a while so I have been saving up credit card reward points to get a gift card to a store that carries them. I ended up getting them for ½ price after the gift card I had – which is a fantastic price for these boots!

My husband and I usually spend $50 or less on each other. I don’t need any expensive jewelry and he doesn’t need a 5000” flat screen TV. What we do need is to feel financially secure in a very unstable economy, so we stash the cash instead of buying expensive gifts for each other. We both feel strongly about remaining debt-free (other than the mortgage) and the holidays are no exception. I guess our real gift to each other is that we take the long-term security of our family seriously, which is priceless! This year my husband is getting 2 books he requested and some fun manly toys that were good deals through Groupon. I can’t divulge the specifics because he may actually read this!

I also send out holiday cards each year that I purchased the year before during the post-holiday sales in January for 75 – 90% off. This year we are sending out picture cards using photo insert holiday cards I bought during the clearance sales last year. I am using a photo that I took of the girls and will have copies made inexpensively at the drug store (and paid for using a prescription transfer gift card!).

Clearly we do not go overboard regarding expenses during the holidays but I know of families that spend $300 or more per family member.  They may rack up $1500 or more worth of holiday bills that all get charged to the card and won't be paid off in January.  We prefer to focus on the meaning of the holiday and the time we get to spend with family, friends and the kids while they are out of school for a couple weeks. 

Your holiday gift budget

Let’s hear it – do you have a gift budget for the holidays? If so, how have you determined what to spend? Do you have a total you are willing to spend for all the gifts you plan to buy or a per person amount? Feel free to share your actual budget, if you are willing.

We'll be talking about frugal gifts ideas in the next week. Here’s to a fabulous and frugal Christmas, Hanukah, Kwanza and anything else you happen to celebrate this time of year!