Making Holiday Spending a Non-Issue

In years past, we have not done much planning for Holiday spending and that tends to lead to some headaches. This year, we decided to do things differently. My husband had inquired about Christmas accounts at our bank and they didn't offer them and for a while, it never occurred to us that we could do it ourselves. Then one day I realized that we don't have to keep our money in the bank. So every week we put a set amount of cold, hard cash into an envelope marked "Christmas".
Before we started, we determined how much we expected to spend on every person on our list, using the higher amount of the price range we usually aim for, and added everything together. We assumed, for example, that we would spend $100 or less on our son, since he is only 18 months old. He is also the only grandchild for my parents, the youngest by 10+ years on my husband's side, and the newest great-grand child by a similar margin all over. This means that he will typically be spoiled rotten by just about everyone, so there's no reason for us to spend even that much.
We then added all the amounts together and divided by 50, assuming that we would need to be done shopping by mid-December. The number was shockingly low. We don't have a huge number of family members and friends to buy for, so we were able to put that money aside without missing it at all. We expect to be able to do this in 2011, even with our coming mortgage payments, without any issues.
In mid-November, we assigned envelopes to each person, noting the amount we intended to put in each envelope, and started filling them. The idea here is the same as with any budgeting system that relies on envelopes – when the money is gone, it's gone. You can't over spend. You also don't forget anyone. We also had an additional envelope to cover holiday portraits and frames, which were gifts in addition to whatever else we give.
I cannot tell you how liberating it is!
We had never had trouble paying for holiday gifts (although we are still not at a stage where we are tempted to buy an expensive "it" toy for our son…) and have never used credit cards so we haven't had to face a big bill in the mail in January, but we did have certain anxieties about holiday spending. We tended to buy as we went, holding out for another paycheck when needed to finish shopping. Sometimes we spent more than we intended because we shopped impulsively. And I always hated when I discovered the last few days before Christmas that I forgot to get something for someone and had to go to Target and pick from the leftover gift baskets, which I generally find kind of boring and impersonal.
So this year, we finished shopping early, were under budget, and haven't forgotten anyone, thanks to our envelope system. We also were actually able to shave several weeks off and combined with what we had already put aside, we bought new laptops as our gifts for each other and don't feel the pain of the expense.
I'm planning to add birthday envelopes and do more year-round shopping in 2011!
How do you simplify your holiday shopping?