It's hard to think of Christmas when you're busy cooling off by the nearest air-conditioning vent, but now is the best time to prepare. Remember that credit card bill you cringed over in January? If you start saving now and plan for your holiday spending, you'll be able to shop guilt-free with cash, and ring in the New Year knowing you won't be paying for those gifts until spring. Here's a plan to get you there.

IN PICTURES: Debunking 10 Budget Myths

Set a Goal
How much does the holiday season set you back? It is estimated that the average American spends between $700 and $800 on gifts. Start by making a list of all the people you expect to buy for, and assign a rough budget for each. Don't forget to budget for travel expenses you might incur, or food and decoration for that dinner party you plan to host for your family. Be realistic about all the added cost of the holiday season, so you have an honest savings goal to work with. (Find the answers to more of your questions in Why should I bother creating a budget?)

Ready, Set … Save!
Now that you have a goal, divide this dollar amount over the months leading up to Christmas. Let's say your goal is $750; divided by five months that means $150 a month, depending on how long you have left until December 25. This will be your monthly savings plan. If you can save up this sum, you will be able to pay cash for everything come shopping time.

Why cash? Remember that January credit card bill? You're not alone: studies show we spend more when pulling out the plastic instead of cold hard cash. Paying cash will make sure you don't spend more than planned, and save you the credit card interest charges. (Discover some of the ways your credit card can cost you in 6 Major Credit Card Mistakes.)

Make Your List and Check It Twice
So what if there is just no way you can make this savings goal? Maybe you or your partner lost a job this year, or maybe you have other bills that take priority over Christmas gifts. Prioritize your list, and look for ways to cut the budget. Instead of buying your colleagues and friends presents, maybe you can make a batch of sweets, or host a dinner - better yet, make it a potluck. Sure, grandma loved that food basket you ordered online, but she'll love a framed photo and artwork from the kids too.

If you're buying for siblings and their kids, consider striking a deal of gifts for the kids only. You'll probably find everyone is relieved that you brought up the subject - if you're feeling the pinch in December, chances are they are too. Find ways to be thoughtful in your gift giving rather than extravagant. Your wallet - and loved ones - will appreciate you for it. (For more, see Holiday Spending Or Spending Holiday?)

Chasing the Deals
Now that you've pared your budget to the essentials and made a savings goal, it's time to start thinking ahead when it comes to your gifts. Are you looking for a book for your mother, or a tool for your father-in-law? Sign up for coupons and deal notifications with online merchants. Sites like,, and will keep you posted on the latest deals and help you get the best price for whatever you're shopping for. (For more tips, see Coupon Shopping: Clip Your Way To Savings.)

When Black Friday gets closer (the day after Thanksgiving when merchants have great bargains), look for deals that fit your list; remember that for most of those, you can simply go online to buy instead of braving the mall madness. One word of caution about early shopping: don't buy gifts for kids too early. Their tastes can change quickly, so if they're into one thing in October, it may be old news by December.

Tips to Stay on Track
Now that you have a clear budget and savings goal, set up an automatic deposit to your savings account, or label a jar with "Holiday Cash" if that works better for you. Get the whole family involved - this is a great way to teach kids about money, or simply unite with your partner to not overspend this holiday season. If you had to make some cuts this year, be honest with your friends and family about your budgetary limits rather than feeling pressured into overspending.

This kind of change is difficult but necessary if you want to avoid the burden of Christmas debt in 2011. Save now, plan ahead and your holiday season will be jolly - and debt-free. (For another option on saving for the holidays this summer, see Christmas In July: How Much Can You Save?)

Catch up on your financial news; read Water Cooler Finance: The Unrelenting Claw Of Bernie Madoff.

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