How to Create a Holiday Budget in 6 Steps (With a 2026 Example)

From gift exchanges, to parties, to traveling, the holiday season can be a wallop on your wallet. With rising prices for everything from plane tickets to eggnog, avoiding a holiday spending hangover in January seems impossible.

Don’t panic over your holiday expenses, or ask Santa for a short-term loan. Instead, plan your season spending the smart way with a holiday budget.

Like your month-to-month budget, a detailed, realistic holiday budget that tracks your spending in real time can go a long way to help you avoid debt and keep your savings intact for the New Year. This way, you can empower yourself to take control of your finances, worry less about how much you have left in the bank, and enjoy the holiday season.

#Why a Holiday Budget Matters More Than Ever in 2026

This year’s holiday season is forecast to be the first to top $1 trillion: the National Retail Federation expects November and December retail sales to rise 4.2% to $1.013 trillion. Last year’s forecast made the same trillion-dollar call and fell short at $972 billion, which tells you something about how stretched households already are. NRF’s own economist notes that inflation, rising gas prices, and pressure on household budgets will hit income groups differently this season. Deloitte’s 2026 Holiday Retail Survey of about 4,000 consumers, released the same week, puts the average household’s planned holiday spending at $1,654, up 4% from last year.

The bigger number is the one most people don’t plan for: the bill that arrives in January. In LendingTree’s December 2025 survey, 37% of consumers took on holiday debt, averaging $1,223, the highest since 2022. Nearly half of parents with kids under 18 borrowed to cover the season. And 41% of those who took on new debt were still paying off the previous year’s holiday bills, which is how one season’s overspend becomes a permanent line in the budget.

Last year’s Cyber Monday drove over $1 billion in buy now, pay later sales, according to Adobe, and in Bankrate’s 2025 Holiday Spending Report only 24% of shoppers planned to set a holiday budget at all.

When holiday spending outruns your income, it can have long-term effects. Credit card and BNPL fees can rack up quickly, and dipping into your savings or investments to cover your holiday can lose you out on compounding interest. Going into debt to cover your holiday spending spree can quickly spiral out of control, which is why it’s crucial to keep your expenses in check with a holiday budget.

#How to create a holiday budget in 6 steps

To create a holiday budget, figure out what’s left after your income covers fixed costs and savings, list your holiday spending categories, rank them, assign a dollar amount to each, trim where the total runs high, and track spending as it happens. Here’s how each step works.

#Figure out your income and fixed expenses

Like your monthly budget, your biggest factor in how much you can spend on your holiday budget will be how your income balances with your expenses. This way, you can be sure you’re still paying for housing, groceries, and electricity, and still keeping up with your goals. (If you don’t have a monthly budget yet, start with how to make a budget and stick to it; the holiday budget sits on top of it.)

A good rule of thumb is the 50-30-20 rule, where 50% of your income should go to needs, 30% to wants, and 20% to savings and investments. Your holiday spending comes out of the “wants” slice. (Of course, this varies based on your household income and spending, so if your starting point is what you’ve managed to save over the year, work off of that number and adjust accordingly.)

The mistake most people make is treating the whole slice as holiday money and forgetting that December still has its usual dinners out, subscriptions, and errands in it. The holiday budget is what’s left after your normal wants, plus anything you set aside earlier in the year.

Let’s say you have an income of $5,500 a month:

The next step is figuring out how you want to spend this $1,550 over the holiday season. If your numbers come out lower, that’s your real number, and the cut-costs section further down is where to go next.

#Create spending categories

When creating your budget, it’s a good idea to categorize your different expenses based on what you plan on spending in the season, such as for travel, gifts, and groceries.

Some of the categories you might want to include are:

• Gifts
• Travel expenses such as gas and flight tickets
• Accommodation costs for rentals and hotels
• Groceries for holiday meals and baking
• Activities and events
• Donations and charitable contributions
• Decorations
• Holiday cards and postage
• A buffer category for unexpected expenses such as last-minute gifts, unexpected travel snarls, or other extra costs. This is separate from your actual emergency fund, which stays untouched for real emergencies.

By doing this, you can organize where your money goes and plan ahead, instead of burning through your allotted amount on one or two things.

#Organize your priorities

Holiday spending doesn’t mean a break from practicing good financial hygiene. When you plan your budget, make sure to keep your overall money goals in mind.

If your top priority for the rest of the year is avoiding pricey credit card and BNPL debt, then you need to pay close attention to your spending throughout the month. Set a hard limit for yourself, and avoid going over it. Give yourself some buffer room with the buffer category for unexpected expenses during the holiday season, on top of your regular emergency fund.

Your categories will also help you figure out what to organize. Write them down in the order you want to prioritize them, with the first being the most important, and the last being least important.

If you want to go all-out on gifts without breaking the bank, you should look at where you can move your spending around to accommodate, such as holding back on eating out or cutting back on travel.

On the other hand, if you’re planning on flying out-of-state to see family, then plane tickets and other travel expenses will likely be higher on the list.

#Figure out how much you want to spend

Once you have your categories created, allocate how much you plan on spending in each category with how much you have budgeted for the holiday season, based on what you’ll need to purchase. With our budget of $1,550, you might categorize your spending this way:

For the gift line, write a name-by-name list with a dollar cap next to each person before you shop; the total of that list is your gift budget, and the list is what keeps a $40 gift from becoming a $90 one in the store.

If you have a holiday budget from last year, use it as a guide to see what your typical expenses are. In Monarch, you can compare the previous year’s spend to this one’s, and, if you have teo or more years’ of holiday spending data, see your averages.

While using a holiday budgeting calculator or planner can help you figure out some rough numbers, when it comes time to finalize your budget, you’ll want a way to track your expenses and transactions in real time so you can stay on top of your spending categories. More on this later.

#See where you can cut costs

If your budget is looking too tight, you’re going to have to rearrange and cut back on some of your expenses. This is where your list of priorities comes in handy, since you can draw the line where you want to cut back, and where you want to keep your budgeted amount the same.

If you need to cut back, here are a few ideas for each category.

Gifts: DIYing presents, especially if you have a talent for sewing, baking or building, can go a long way. If you have a large family or friend group, consider setting up a Secret Santa gift exchange so each person only has to buy one gift. For kids, the four-gift rule (something they want, something they need, something to wear, something to read) caps the count before it caps the cost. Check out further ways to save in How to save money on Christmas gifts.

Travel: Manage travel costs with friends and family by carpooling, agreeing to travel somewhere closer to you, or planning to travel on off-peak days for cheaper ticket and toll prices. Consider burning some travel points on your rewards credit card, if you have one.

Food: Plan meals ahead of time so you can grocery shop for efficiency. Instead of eating out or ordering catering, coordinate potlucks so that everyone brings their own dish. If you’re traveling, consider getting a rental with a kitchen.

Decorations: Re-use decorations from last year, or hit up the thrift store for some new holiday glitz. See if you can snag deals for lights, trees, and ornaments in the off-season to prepare for next year. DIYing decorations such as wreaths or garlands can be a fun family activity.

Activities: Look up free or low-cost holiday activities in your area such as public ice rinks, community caroling, and holiday markets. Movie and game nights can be great (and free) ways to connect with your family over hot cocoa.

If you’re really short on cash for the holiday season and need a way to fill the gaps in your budget you can also:

• Pause subscriptions for the month. If you’re not planning on going to the gym, or won’t get through more than one streaming service during a family movie marathon, pause what you won’t use for December and restart in January.
• Pick up on some side gigs. Gift wrapping services, pet sitting, and ride sharing are all in demand during the holiday season.
• Sell some DIY gifts. If you’re a whiz with a sewing machine, or make killer decorated cookies, see if you can hit up some local fairs and market your goods.
• Get rid of your extra stuff. If you have some extra decorations in your attic, or an ugly Christmas sweater you can’t bring yourself to wear, see if you can sell it online or at a consignment store. The closer it is to the holidays, the more in-demand it’ll be.

#Keep track of your expenditures as you go

Core to staying on top of your budget is keeping an eye on your spending. It won’t do you any good if you check your Excel spreadsheet in January and see you’ve spent too much on ride shares. Instead, you need to track your expenses in real time so you can stay within the limits you’ve set for your budget.

Staying on top of your expenditures on the go can be complicated in the busy holiday season, especially if you have multiple accounts and cards to track. This is where money management platforms like Monarch can help you.

#Set Up Your Holiday Budget in Monarch

When it comes to tracking cash flow and expenditures in real time, Excel can only get you so far.

Let’s say that you’ve got a busy holiday season ahead of you, with a big trip planned to visit your family out-of-state. You and your relatives are splitting an AirBnb for a week. Besides sharing costs, you need to keep track of how much you’re spending on flights, groceries, gifts, pet sitting, activities, and a last-minute present for your niece’s new boyfriend who decided to tag along.

Here’s how you can create a budget in Monarch to keep track of your spending and stay organized during the holiday chaos.

#Connect your accounts

If you’re new to Monarch, your first step is to link your financial accounts to Monarch so you can track your income, expenses, savings, and investments.

Even if you have an established Monarch account, be sure to update your accounts to accommodate for holiday spending if you’ve opened a new credit card, or are using BNPL for the holiday season.

#Create a holiday spending group and categories

Your first step is to create a new, non-monthly spending group for your holiday budget. This way, you won’t have your budget become a recurring expense from month to month.

After you’ve created your Holiday Budget group, you can then add new categories based on your typical holiday expenses, like travel, groceries, and gifts for individual people.

While you can lump all your holiday spending in one category, it can be helpful to split up your spending across different categories in a group. Categories help break your budget into more manageable pieces and give you the opportunity to adjust on the fly. For example, if you realize your gift fund is running a bit high, you can either dial back the spending or allocate some funds from the grocery budget.

Categories can also help track costs if you’re splitting bills with friends or family, or if you want to forecast your spending for next year.

If you find yourself needing a new category halfway through the month, you can always create a new one and adjust your spending and transactions accordingly.

#Set your spending limits

As you create your holiday budget group, you can set the amount you’re budgeting overall for the season, and then set individual limits for each category.

Monarch will show you how much money you have left over in your budget as you allot your spending.

#Keep track on the go

Now that you’ve set your holiday budget, you’re ready to go and take control of your seasonal spending. You can use the Monarch mobile app to categorize each transaction on your accounts with just a swipe, and add each transaction to the category you choose in your holiday budget group.

If you’re in a hurry, you can use Monarch’s AI tool to help you categorize your transactions as they come in. You can always reorganize them later if you want to categorize them in a different way.

Monarch helps you stay on top of your spending by tracking your allotments. If you go over the limit, you’ll receive a push notification and an email alert based on what you set in your preferences.

#Set goals for next year

When January arrives, and you’ve (hopefully) avoided the holiday spending hangover, make it a New Year’s goal to set aside money for next December. Create a save up goal in Monarch with a target amount, a target date of next December, and a planned monthly contribution, and Monarch will show whether you’re on track, ahead, or at risk.

Using your budget from the year before can give you a benchmark of how much you should save, with room to grow if you want to upgrade your gift-giving game. Take this year’s total and divide it by the number of months until next November; that’s the monthly contribution. A $1,550 season saved from January is about $140 a month. You can also use rollover categories, so if you end up spending less on one category than expected, you can have that amount rolled over into the next month.

A holiday budget turns December from a guess into a plan: you know your total, every category has a limit, and you can see what’s left before you buy. Try Monarch for free.

#FAQs

How do I make a holiday budget?
Work from the top down: start with what’s left in your monthly “wants” budget after your usual December spending, add whatever you’ve already set aside, and that total is your ceiling. Then split it across the handful of categories you’ll actually spend in, rank them so you know what to cut first, and track every purchase against its category as you go rather than tallying up in January.

How much should I spend on holiday gifts?
Write the list before the number. Name every person you’re buying for, put a cap next to each name, and add it up; that sum is your gift budget, and if it’s bigger than the gift line in your holiday budget, the list is where you trim (fewer names, a group exchange, or lower caps), not the ceiling.

Is $1,000 a lot to spend on the holidays?
It’s a little below average. Deloitte’s 2026 survey puts the typical household’s planned holiday spending at $1,654, and the LendingTree debt figure for people who borrowed was $1,223. The useful question isn’t whether $1,000 is a lot; it’s whether $1,000 is what’s left after your needs, savings, and normal December spending. For a household earning $5,500 a month in our example, it is. For one earning $3,500, it probably isn’t.

What categories go in a holiday budget?
Group them by how you’ll track them: things you give (gifts, donations, cards), things you go to (travel, lodging, events), things you host (groceries, decorations), and a buffer for the surprises. Most households use five or six categories; more than that and the tracking becomes the chore.

When should I start saving for the holidays?
The month after this season ends, and the math is simple: take what you spent, divide by the months until next November, and automate that amount into a holiday fund. If you’re starting in October with nothing saved, divide your target by the paychecks left instead; $1,550 across four biweekly paychecks is about $388 each, which tells you quickly whether the target or the timeline has to give. A high-yield savings account earns a little extra while it waits, and a goal in Monarch shows you the progress.

How much should I set aside each month for holiday spending?
Divide your total holiday budget by the months left until you start spending. With the $1,550 budget from the example above, starting in January gives you 11 months, or about $141 a month, while starting in July gives you 5 months, or $310 a month. In Monarch, a Non-monthly category with rollovers on calculates the monthly amount and tracks what you have set aside so far, which you can set at any point in the year.

How do I stick to my holiday budget?
Track every purchase as it happens, and keep your buffer category for surprises. If one category runs high, move money from another holiday category instead of going over your total. In December, check your remaining amounts each week so you can adjust before you overspend.

How can I avoid holiday debt?
Avoid debt by staying on top of your budget and making sure you don’t spend more than you can pay off at the end of the month. Monarch can track your spending in real time so you can keep an eye on your expenditures and dial back as needed. If you’re really worried, consider using cash or a debit instead of credit cards or BNPL, so you have a hard limit on how much you can spend. And if you’re still carrying last year’s balance, as 41% of holiday borrowers were, pay that down first; anything above 25% APR should be cleared or refinanced before you can start dedicating extra money toward holiday spending. If you have any remaining debts below 25% but above 7%, put the plastic away and use the cash you have on hand.