Here’s how I start planning for Christmas — in October

Ramit Sethi


First, let me say that there is nothing more soul-crushing than walking into a store and seeing Halloween pumpkins up in July or Christmas elves milling around in October. But I do have to admit that there’s something catchy about those Mariah Carey Christmas songs. Ok, now that I’ve brought into question my entire sexuality, let’s look ahead a couple of months.

Come the first week of January, people will start getting their bills from Christmas and will start wondering what the hell just happened. Did they really spend $907 — the average amount spent on Christmas gifts — this year? Don’t forget to factor in travel, food, etc.

That’s why I think Christmas really starts in October. On the first of every October, I start saving for the Christmas gifts I’m going to buy. I don’t know exactly what I’ll buy, but I have a ballpark amount in mind. Let’s just say it’s $500.

How do you save for a specific event? Two main ways: Make more money or cut costs (i.e., re-allocate your spending from one thing to another). In this case, I decided to re-allocate some of the money I save for a house towards Christmas gifts.

By starting in October, I have three months to save, which makes it about $42/week. If I had waited until the first week of December, I would have had to save $167/week. As usual, whether saving or investing, time is your friend.

This whole concept of saving consciously and early isn’t limited to Christmas gifts.

SEOmoz, a website about search engine optimization, highlights trends in search terms for special holidays. If you were looking to grow a site’s traffic, when might you start planning?


Answer: Ahead of time. And planning ahead applies to your money, too.

How Christmas saving applies to all of personal finance:

  • When consciously saving towards a targeted goal, starting earlier means you actually have to save less per month than if you start later (see a spreadsheet of how this works)
  • In your savings account, set up buckets of what you’re saving for, like “new house” or “Christmas gifts.” Don’t bother with fancy software to do this — just use a separate Excel sheet or write it on paper. Having specific buckets within your savings account make it much clearer what the money is for, rather than having some amorphous blob of money that’s sitting there waiting to be raided.
  • Most people will never plan ahead and will complain about how they never have any money. This is true of Christmas gifts and life.
  • “But Ramit,” you might say, “It’s already November! I can’t do this now!” This is the Shrug Effect and, if you say this, you are a moron. Would starting last month have been better? Yes. But starting now is better than not starting at all.

As always, one of the primary differences between rich people and ordinary people is saving before you need to.

Or…opt out of Christmas gifts altogether
I’m constantly astonished how many people who don’t have the money feel the need to buy gifts for other people. If you’re not financially secure, I honestly believe the best gift you could give would be to say, “Hey guys, this year I decided to be brutally honest with myself and admit that I can’t afford to give any gifts. So this year, the only gift I’m giving is to get myself financially stable.” Wouldn’t your family and friends appreciate that more than some crappy trinket or pair of earrings from Claire’s? If my future son or daughter ever says that to me, I will fall in love with them…when they are around the age of 24 or 25. Now my future kids have a clear path to earning my love. God, I love it.

Btw, on a completely unrelated note, here’s my Amazon wishlist of 553 items.

PS–Send this to your friends who always overspend on Christmas gifts and then complain about money problems.

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  1. Nikhil Sharma

    I think this is right on. When I do this, I will break up the christmas savings into even more sub-divisons: gifts, stationery, decorations, tree, etc. I wouldn’t want to save some amount and then suddenly find out I can’t give a friend the gift s/he wanted because I wasted the last $x I had on hallmark cards.

  2. camp

    not sure that the amazon wish list link works.

  3. RickSF

    I think saving for Christmas (or any known expenses) early is a great idea. To take it even further- you can also use that extra time to get better prices on the same items, because you don’t have the time pressure. A few practical examples: if you know there are periodic sales on the gift you want you can keep checking flyers for a few months. If you are bidding on something on EBay you can afford to wait for the next auction if the price gets too high. If you are shopping in Dec you won’t have the option to wait for a sale or opt out of a bidding war time pressure will cause stress as well as costing more money.

  4. Mrs. Micah

    We opted out. We’re not financially secure or stable enough to give gifts to everyone. And we don’t want to show favoratism. So we’re going to spend time with both families (which we know our parents will appreciate at least as much) and I’m working on a project to honor my grandfather on one side who passed away several years back as a kind of present for that side.

    Now that I think about it, maybe I should do something next in honor of the other one, who passed away more recently….

  5. Katie

    Last year, I baked bread and made meals that I froze and then gave to family members for gifts. It saved us a lot of money, and they appreciated having food on hand (and one less trinket to sit around their houses).

  6. camp

    just FYI,

    i think the link to *your* gift list is:

    the other one just takes me to the generic registry page.

  7. Akasha

    As a recent graduate with a huge pile of student loans to pay off for the next ten years I’m beginning to get really conscious of how I spend my money. I discovered weblogs such as yours and (which offers a lot of good advice, even if you’re straight – money appears to be sexually-neutral) and things have snowballed. I’m budgeting my expenditures and saving my pennies. Around mid-October I realized I should start a savings fund if I really wanted to buy all of those gifts this Christmas that I plan to. Thus, I’m putting roughly $50 in a separate account each week to save for the big day. This may sound corny, but it’s honestly thanks to people like you, Ramit, who offer simple advice to everyone about money. Sure, I was saving money before, but it was going into one sort of blobby account. I don’t necessarily know what all that money is going to be for and at times I felt like I didn’t need to put as much into it because I couldn’t clearly define what I was saving it for. Now that I’m actually taking a hard look at my finances, it’s really making a lot more sense.

    Anyway, to make a long story short – I totally agree with you on this – the longer you save the more you’ll have to spend OR the less you have to put in each week to get to that number you want to spend. Great post!

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  9. SW

    We use the biweekly system to get two paychecks worth of extra savings each year (one goes to X-mas, one goes to taxes). If you get paid biweekly (instead of once or twice a month) there are two months each year where you’ll get an extra paycheck. For us, there are two known expenses each year that are more than the norm: taxes and Christmas. So one of the extra paychecks (usually march or april) goes to paying whatever we owe in taxes while the left over pads some savings accounts and the other (usually sept/oct) goes to paying for our Christmas budget. It’s great, because Christmas is paid for before we even get there and it really cuts down on the stress.

  10. escapee

    oh no you didn’t, Ramit!

    this is similar to your post about saving for weddings, and it explains a good idea if you are going spend so much money on this type of stuff.

    BUT- now you are going to get a BILLION comments on the theme of “how I made/bought cheap christmas gifts”. Have fun reading them all!

  11. Tyler Karaszewski

    “Buckets” are extra complication to manage, and counter-productive in the long run. All you need is a “stack” of savings goals. Let’s say you have three savings goals. You want to save a $2000 emergency fund, $2000 for a nice flat-screen TV, and $2000 to take a trip to Europe.

    Say that you can afford to save $300/month.

    If you do this with “buckets” You can put $100/month into each bucket. When do you get to take your trip? It takes you 20 months to save your $2000. What about your TV? You don’t get it for 20 months. Your emergency fund? Not ready for 20 months.

    Say you do this without buckets. You just “stack” your goals like this:
    $6000 (total) – $2000 – TV
    $4000 (total) – $2000 – trip
    $2000 (total) – $2000 – emergency fund

    Now you throw all your money into one big savings account, so that When do you have your emergency fund saved? It takes you less than 7 months. How about your TV? You have your TV in 14 months. What about your trip, did that get pushed back because you got your other goals sooner? No, you still get it at 20 months. You just prioritize your goals and save for the lowest one on the stack. You can remove it from the bottom of the stack once your goal is met. Your total savings goal is just the sum of everything in your stack, and you meet your goals faster.

  12. WhitneyDT

    There’s no Celine Dion on your wish list! We have some you can borrow.

  13. thisisbeth

    Tyler–the bucket and the stacking approach can go hand-in-hand. I have three different accounts for my longer-term saving plans (emergency, car, and house down payment–order of priority). I know right now that if a huge emergency were to happen, and my emergency fund didn’t have enough funding, money would be taken from the car and house funds. It’s just fun to see the three longer-term goals grow. If I would be saving solely for my emergency fund right now, I’d be a little depressed that my plans for a new house are so far away, and a little nervous that if my car would have a major break-down (one not worth repairing), I’d have to raid the emergency fund to buy a “new” car. Sure, it’s no different either way, but it makes me feel better to see money allocated to certain expenses.

    [Right now the car fund has the most money, so it gets the least money each paycheck. The emergency fund has the least money and gets the most money for each paycheck. When the account balances even out, then I’ll even out the payments.]

  14. Amr

    I thik saving for any occasion is a good idea!
    thanks for your ideas.

  15. April

    I won’t post a million ways to give inexpensive gifts, but I will say that I don’t believe in telling people you aren’t getting anyone anything except myself. It’s rude to make that statement, and I promise you will offend people. It’s less rude to say nothing at all.

    There are plenty of ways to show love and appreciation inexpensively…Google it.

  16. noah kagan

    This whole article is full of bs. Why are you saving until October just to buy me a burrito?

  17. Juli

    I’ve actually put a “Gifts” column in my budget for each month. I know roughly how much I spend on each person I buy gifts for and allocate it through out the year. I do this because I know I’m one of those people who sees something perfect and gets it right then. It works out great because I’m usually done Christmas shopping by the end of October and I can use the money that I save in my work Christmas account for a little gift for myself (or it just goes into savings). Plus, for all the people that I’m sort of friends with (usually just spend money on family and the closest friends) I just make candy. Gotta love having a hobby that produces gifts. It’s a win win!

  18. Nicole

    My savings plan includes monthly contributions in the categories of: vacations; christmas; other gifts; and house downpayment, which totals $700 per month. I keep an excel chart with a page for each category. Each month, I transfer the total of $700 into a high yield savings account specifically for these goals (collectively).

    Each month, after transfering the $700, I enter the amount allocated to each category on the relevant page of the spreadsheet. If I use some of that money – for example on a gift, it comes out of the savings account, and i deduct that amount on my spreadsheet for gifts. That way I am saving each month for all these goals and I am tracking where the money is being spent. If I overspend in the gift category, that page will show a negative balance but the total savings account will still be positive. With future deposits that category will build up again until it is positive again.

    It’s not that hard to track, and I don’t have to keep separate savings accounts for all these different goals. Plus, this way, I am saving for christmas all year round, not just at the end of the year.

    The one thing I do keep separate is my emergency fund.

  19. Start Financially Planning for the Holidays Now [Saving Money] · TechBlogger

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  20. Matt Wolfe

    That’s some good advice but I usually start buying stuff for Christmas in October and November to get deals and so I don’t have to think about it later. If I save up every week until Christmas, I’ll be doing my Christmas shopping on Monday Dec. 24th and by that time there’s nothing left. Not to mention, it’s no fun fighting off those middle aged ladies for my chance to get my hands on a tickle me elbow 13 hours before I’m going to give it as a gift.

    If you can’t buy gifts for people because you finances just won’t allow, you can always make something. It is the thought that counts, right?. Who doesn’t like a finger painting on construction paper with noodles glued on for eyes, nose and various other appendages? I’m 24 years old and I still give that gift to my loved ones when I’m strapped for cash.

  21. Jim C

    $907 for Christmas shopping?! Yikes! No wonder the average person has so much credit card debt.


    I have a “gift shelf” in my house, and I am always buying stuff year round for Christmas and Birthdays. This way I can get the best price; since I pay my cc off every month, I don’t get stuck with a crazy situation after Christmas. I actually have found this so much fun because I spend the whole year plotting just how awesome my presents will be for everyone! My husband and I usually limit ourselves to just $50 for each other, and I am always able to get 6-8 great gifts for him b/c I shop all year round. If only I could get him to realize that shopping on Christmas eve for a bathrobe is not cool!

  23. Steve W

    My wife finished our Christmas shopping in August (for 5 kids and others). We don’t have extra money laying around, but I do have Excel and 5th Grade Math: I total up for an entire year every major “one-off”/non-monthly expense, including Christmas, vacation, auto tax, birthday presents, insurance payments, pool membership, etc. Then I divide the total by 26 pay periods, and save that amount each pay-period to cover it. For me, those figures were $8,786.12 annually and $337.93 per pay check. In the event that my spending gets ahead of my savings, which happens, I use my emergency fund to temporarily cover. Much peace of mind comes from knowing that I have a plan to cover annual, big-event expenses, and that I can live within my means (i.e. no credit spending on non-investments).

  24. The Dividend Guy

    My wife and I actually put money away all year for Christmas – it is a very important time of year for us and we want to ensure that we have the resources available to do the things that we want to do. Spreading it out over the year makes it very easy – and we don’t worry about the bills in January.

  25. mary

    Thank you so much for offering the “buy no gifts” option. Last year I encouraged my family to institute that idea, and we wound up having such a lovely family get-together without the anxiety around a) what the hell to get each other and b) the fact that none of us can *really* afford gifts. It’s been a nice way to refocus on what we each actually value.

  26. Moneymonk

    I opt out of Christmas gifts altogether, I guess that explains my nice bank acct

  27. Eric E

    I am so grateful for the advise that you continuously give out throughout the year. That is why I was going to buy you a gift from your Amazon wishlist, but “….this year, the only gift I’m giving is to get myself financially stable…”

    Sorry… maybe next year!

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  29. Dale Swinford

    One thing I haven’t seen mentioned yet: our “extended family” includes several “20-somethings”, as well as moms and pops and uncles and aunts.

    A few years ago, the “older” generation realized that if *everyone* got a present for *everyone*, it would seriously tax the kids’ finances, so we instituted a system of putting everyone’s name in a bowl and having each person pull out a name when we all get together for Thanksgiving. You are responsible for purchasing a gift for the person who’s name you drew, and no-one else. We put a strict limit on the amount (originally $25, but now up to $100, as the kids got older).

    The net result of this is that *everyone* gets a gift (and a nice one, instead of a “trinket”), and no-ones budget is broken at Christmas. An interesting side effect is that the “geezers” can still “go crazy” on spouses and grandchildren (and we do ;-)), without the expectation that the kids will be paying for Christmas until June.

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  31. Matt

    I am able to save by keeping several no cost or at least very cheap and frugal hobbies. As long as you can keep yourself occupied cheaply, this is all that matters.

    I restore junk furniture.
    I program games using free software tools.
    I build websites and try and host them at home.
    I am attempting to build a company on nothing, it may not work but
    it is fun to try.
    I train my dog and cat to do tricks. Cat hasn’t learned much.

  32. Linda V

    I like to buy gifts throughout the year when I see the “perfect” one. Which is sort of like saving all year for Christmas. HOWEVER, I still do save for Christmas, because EVERYTHING is on sale, and I have a list of “We Needs” and I buy for the house in December while everyone is slashing prices to entice the Christmas buyer. It is the BEST time to get that extra or new TV or DVD player, I-pod, laptop, bedroom comforter, lamp set, etc.
    Most of my business wardrobe is purchased before Christmas as well. It used to be so disheartening when I needed what was on sale, but couldn’t buy, because I hadn’t planned, and needed to meet the Christmas demands. Now I do both. Christmas is done by Oct, and I plan for the Christmas sales!

  33. linda

    I am 57 years old and I rarely do much for Christmas. My parents have every thing they need or want. So I do not send them anything. They have suggested this.

    For my kids but I give them a real special gift. I live on the West Coast and they live on the East Coast. What I give them is a $50 gift certificate for Southwest Air for Christmas and a $25 gift certificate for them for their birthdays. That way they have some money to help them come visit me.

    For the boyfriend I buy him a book from the Friends of the Library book sale. Something special that I know he would like. Most of their books are in great condition for a few dollars.

    My Christmas budget $160. I hate the consumerism of Christmas. It is such a turnoff!!

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  35. aimee

    My husband’s family is pretty materialistic and attempts at limiting gift giving to one person drawn from a bowl haven’t worked. So we have to buy for twenty people just on his side, and they have everything to begin with.

    I stopped buying individual gifts for them years ago and instead buy each couple (aunts/uncles etc.) the same thing. Last year we made calendars on Shutterfly for $15/each. This year’s gift is a crystal ornament set from Pottery Barn. I found them online back in February marked on clearance from $40 to $10 each. I bought ten for $100. Bonus: they came gift wrapped. Bah humbug!

  36. Phoenix

    Use your Christmas Club account. Nearly all credit unions have one. The money can be automatically deducted starting in January and is “set free” for you to use in November. The cycle starts all over again in January. (may be different for each credit union)

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  40. Elizabeth

    I save year-round for it! A little each month goes a long way. But thanks for the tips!

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  42. Jeremy Brown

    It’s never too early to start planning Christmas! Plan your holidays budget with If you decide to go to Paris, New York, Sydney, Bangkok or Moscow, try to create your first budget encompassing all places you visited, photos you made, links you followed – all the range of locations where you stayed, ate, had fun. If you share the budget with friends, they will be able to add it into their calendar and repeat your unforgettable journey.

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