Christmas is right around the corner; you’re off for the rest of the year; and hot chocolate and holiday films await you at home – the festive season has begun!

And yet, oops! You need to go last minute Christmas shopping. As always, don’t go broke trying to stuff those stockings or to fill up that tree. Still plan to budget your last minute Christmas shopping. And remember, you still want to go from a Millennial to a Millionaire, and so don’t let the holiday season derail you in any way. So what you need is a last minute holiday budget!

A budget helps you manage your hard-earned money. You’ve got student debt; a car loan; rent; and saving for retirement that you need to account for to meet all of life’s demands knocking on your door. A budget will help you manage your Christmas shopping as you deal with a whole host of other financial demands, such as housing costs and 401(k) savings.

There are many budgeting methods out there, but I use percentage budgeting for after-tax income because of its simplicity. With this method, you allocate a percentage of your spending and saving to categories of your choosing. You can use this for your Christmas spending.

Here’s how you can budget this holiday season to keep it easy:

  1. First, housing is the biggest expense so spend no more than 35% on rent, utilities and insurance – or even a mortgage if that’s where you are!
  2. Second, still tuck away 15% for retirement savings.
  3. Fourth, if you’re paying down debt, calculate your student debt percentage and don’t sacrifice this for holiday gifts!
  4. Third, the remaining percentage is yours to save and spend this month on holiday gifts!

Example budget:

Let’s say you make $47,000 per year. This translates roughly to $3,917 per month (= $47,000/12). With this income, and with 2017 taxes, you are in the 25 percent federal marginal tax bracket.

Gross pay tax & deductions

  • Gross pay: $3,917
  • Tax (25%): $979 (= $3,917 × .25)
  • 401(k) contribution (max 15%): $588 (= $3,917 × .15)
  • Net pay: $2,350 (= $3,917 − $979 − $588)

So you have your net pay to work with your monthly budget.

Net pay budget

  • Housing (35%): $822 (= $2,350 × .35)
  • Student debt: $272 (which is around 11.5 percent of net pay)
  • Holiday budget: $1,256 (= $2,350 − $822 − $272)

What does this mean?

My budgeting philosophy is based on my own adage that “as long as you can pay your bills and pay for your retirement first” then the rest is up to you on how you want to spend/save it on the holidays! Don’t get into any credit card debt this holiday season, and with a budget you don’t have to. I believe that if you pay for yourself today (i.e. your rent, utilities, etc.) and pay yourself for tomorrow (i.e. retirement savings) than that will create a steady financial foundation that will keep you out of bad debt, like credit card debt, and provide you with the financial security you need in the future.

Here’s how you can make sense of what these numbers in the example budget mean:

  • Housing: You can’t live in an apartment, along with utilities, that’s going to cost you more than $822/month. That may mean you can’t afford the new commercial complex with all the amenities and rooftop pool! Instead you may need to find an affordable studio or live with a roommate.
  • Retirement: Tuck away at least $588/month into retirement savings, preferably starting with your 401(k) – and hopefully there’s an employer match! See how little 15% of your salary seems in the grand scheme of things? At only $407/month, you’ve already hit the max recommended retirement savings amount!
  • Student debt. Calculate your monthly payment and bake the amount into your net pay budget. The US government’s standard repayment program gives you 10 years to pay off student debt. The good news is let’s say you went to a public 4-year university, you’ll probably have about $30,000 in student loans. That translates to around $272 a month, for 120-month repayment. In this example, make sure to pay $272/month or more.
  • Holiday budget: You then have $1,256 to do as you please, even for your last minute Christmas shopping. Now, go to town and get the gifts you want for all those whom are on your shopping list!

See, with the budget in place you meet your financial obligations (rent, retirement and student loans) with ease and you have a good amount of money left over to do as you want for your holiday shopping! And as the New Year comes around, and as you advance in your budgeting skills, find ways to cut out excesses, such as buying coffee in the morning, eating out for lunch at work every day and paying expensive gym memberships and too much for your cable bill. Constantly look to slim down theses costs in your budget and you’ll have even more this holiday season to spend wisely!

Follow me on Twitter @MatthewKMiller.

Want to learn more? Pick up a copy of my book …

From Millennial to Millionaire: DIY 401(k) – 5 Do-It-Yourself Steps for the Digital Generation to Design and Manage their 401(k) on Amazon