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Setting and sticking to your holiday budget 

We’ve already talked about how to ‘survive’ your Christmas spending in a recent article. This time, let’s delve a little bit deeper into holiday budgeting – how to create one…

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02 December 2022

Setting and sticking to your holiday budget 

Like to create a sticky budget? There are five key ingredients to it.

We’ve already talked about how to ‘survive’ your Christmas spending in a recent article. This time, let’s delve a little bit deeper into holiday budgeting – how to create one and, most importantly, how to stick to it. 

Here’s what you need to make it work: 

  1. Time – The earlier you start, the better. 

  2. A gifting strategy – complete with spending limits and names.

  3. Lists (for everything) – from gifts to travel costs.

  4. Cash or a debit card – Holiday spending can turn into holiday debt more easily when using a credit card or buy-now-pay-later options.

  5. Mindfulness – Be aware of ‘marketing nudges’, and make sure you take your lists to the shops with you. 


 1. Don’t wait until the last minute (if you can). 

When it comes to both holiday saving and spending, the earlier you start, the better. Of course, if you’re reading this in December, you can keep the following two tips as food for thought for next year: 

  • Create a holiday savings account – at least a few months before the holidays, set up a dedicated bank account in your online banking and start saving up. To make it hassle-free, consider setting up automated transfers from your main account.  

  • Begin holiday shopping as soon as possible – Not only this can reduce stress, but you may also save money by shopping around and buying on sale, when nearly no one else is thinking about Christmas yet.

Is it a little too late for all this? You still have plenty of time to…  


2. Plan your gifting strategy. 

It may not sound particularly festive, nor does it conjure romantic notions of the holiday spirit, but it’s a good idea to have a ‘gifting strategy’. Here are the key steps: 

  • Make a list of everyone you’ll be giving presents to this year.  

  • Consider your holiday bottom line (the maximum amount you’re willing to spend in presents), then break it down into recipients. 

  • Set spending limits, per person or per gift, and write them down – keeping this list handy will make it easier when you’re out there shopping. 

  • Be creative and think ‘outside the box’ – a gift doesn’t have to be complex or expensive, as many people are perfectly happy to receive something thoughtful. 


3. Make a list of literally everything. 

With all those lights on, the ubiquitous Christmas music being played in stores, and the sudden jolt of peer pressure, it can be easy to get carried away in the festive spirit and overdo it. But that’s where lists come to the rescue. Be that gifts, food, decorations or travel costs, having a list in your pocket will probably save you a lot of time and money. 

 Buy now pay later? No, thanks. 

On the surface, buy-now-pay-later has a nice ring to it, but it can turn into a slippery slope pretty fast. By allowing you to break a purchase into multiple payments, BNPL can prompt you to spend money that you don’t have – especially if the budget is tight. Plus, late fees are significant if you miss your repayments. So, whenever possible, consider paying cash or with a debit card instead.  


4. Be aware of marketing nudges 

For hundreds of years, retailers have perfected the art of enticing customers to spend money, and the holiday season is when they roll out the heavy artillery. As Deakin University’s senior lecturer Paul Harrison put it(1), “By drawing a plethora of psychological and sociological research, marketers subtly give us permission to buy and not to think too much, or too deeply, about why we’re buying.” 

It's just how things work, but there are ways to protect your wallet from these powerful marketing nudges – and that’s knowing them. Here are some examples that Harrison mentioned: 

  • Scarcity effect – If we think that something is only available for a short time (for example, when we have a hard deadline like Christmas), we tend to give it more weight and feel the need to buy items that we would normally ignore. 

  • Overwhelming stimuli – Mariah Carey’s All I Want for Christmas is You almost seems to have a Pavlovian effect when you enter a store: would it even be Christmas without it? And that’s the point. Harrison says it’s all part of a strategy to overwhelm our cognitive processing by filling our senses with festive music, lights, and scents. 

  • Inability to forecast – According to research(2), as humans, we rely on how we feel right now to predict how we might feel about something later. So, especially when we’re stressed or in a hurry, we buy things that we think we will need, to avoid missing out on that feeling later. Once again, that’s where having a gifting strategy and clear lists makes all the difference, taking a lot of the pressure off Christmas budgeting. 

Festive shopping can a hectic task or stretch your budget too far. By knowing how marketing nudges work, and shopping ‘with a plan’, you can avoid impulse buys and keep those merry feelings well into the New Year. 


Wrapping up 

Remember: creating a budget is not about making sacrifices. It’s about getting the most out of your hard-earned money and being in the driver’s seat of where it’s going. For more tips on budgeting all-year round, check out Part 1 of How to create a perfect financial plan


Further reading: 
  1. – The Psychology of Christmas shopping: how marketers nudge you to buy 

  1. - Affective Forecasting 

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.