1. Set your budget. The best way to start making a holiday budget is to look at last year’s spending. In what areas did you spend more than planned? Next, list the major items, activities and events you plan to spend money on this year, including gifts, entertaining, meals and travel. Estimate how much you can afford to spend in each category. Set a specific spending limit for each person on your gift list. Many financial planners recommend spending no more than 1.5 percent of your annual income on holiday expenses.