icon of two gears to show concept of expanded lessons Expanded Lesson 6 min read

Tips for Smarter Holiday Spending

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The holiday season is right around the corner, and all those added expenses could significantly impact your finances. From gift-giving to lavish homemade meals and traveling to see loved ones, the costs can put a dent in your bank account or force you to take on more debt, but there are ways to enjoy the holidays without spending a fortune. Use these holiday spending tips to get through the season unscathed.

Smiling woman shopping for holiday ornaments at outdoor holiday market.
Yellow notepad with pen svg icon Lesson Notes:
  • Create a budget to avoid spending more than you can realistically afford around the holidays.
  • This year, Americans plan to spend roughly $832 on holiday gifts, food and decorations.
  • Consider free options and look for special holiday discounts to save as much money as possible.
  • Memorable holiday experiences can be more valuable than spending money. Brainstorm some low-cost holiday activities that you can do with the whole family.

Creating a Holiday Budget

One of the best things you can do to improve your spending habits around the holidays is to create a budget. Itemize how much you expect to spend on travel, gifts, food and other seasonal items. You can set a spending limit for each person on your gift list, look up the estimated cost of airfare or gas and plan out meals in advance to get a more accurate total. 

It may be helpful to create a budget plan for separate categories to see how much you plan on spending on each aspect of the holidays.

Compare the total cost of your holiday plans to your income and anything you’ve saved for this time of year. Think about how much you can afford to spend without taking on more debt.

The holidays are important, but you should balance your desire to travel and purchase gifts with your other financial responsibilities. You should continue making payments on your existing debts during the holidays, even if you are spending more money than usual.

If you’re worried about making your payment on time, check with your financial institution to see if they have programs that allow you to skip a payment. These programs can help if your monthly budget is stretched thin, usually for a small fee.

Some experts recommend spending no more than 1% of your annual income on holiday travel and gifts. For example, if you make $50,000 a year, you shouldn’t spend more than $500 on holiday-related expenses.

The holidays can catch many people off guard. The best way to pay for all your holiday expenses is to start saving a little money every month until you reach your goal. If you don’t have any money saved for the holidays, you may be tempted to use a credit card or holiday loan to pay for your gifts and other expenses.

Be sure to use credit wisely. If you decide to take out a loan or use your credit card to pay for expenses, make sure you can afford the monthly payment and try to pay off as much of your debt as possible to avoid paying interest, especially if the loan or card has high interest rates.

Holiday Budgeting Tips:

Setting a budget is only helpful if you commit to it over the course of the holidays. You may be tempted to indulge in unexpected items and services, but they could easily send you over budget. Use these holiday financial tips to stay on track.

Agree to a Spending Limit

Knowing how much to spend on your loved ones can be challenging unless you agree to a specific spending limit. Some people can afford to spend more than others based on income, and you may feel pressure to spend more than you should. But setting a spending limit gets rid of the guesswork. Everyone can commit to a price they can afford, so no one feels embarrassed if their gift costs less than someone else’s. 

Consider Free or Low-Cost Alternatives

Some of the best gifts are free. If you can’t afford to spend money on a gift, consider showing your love in other ways. Get creative with your gifts instead of choosing the most expensive items. 

You can spend quality time with the people on your gift list or try making a homemade gift instead of spending money. Bake a delicious treat, send them a unique card online or simply set a date to have quality time with your special person. 

The possibilities are endless if you give yourself enough time to think of something special. It’s the thought that counts, not how much you spend.

Monitor Your Spending to Stay on Track

Your spending can easily get away from you when you get a taste of the holiday spirit. You may be tempted to buy a latte while you shop for gifts, pay expensive delivery fees to ensure your order arrives on time or buy something extra because it’s on sale. 

Every dollar you spend on holiday-related activities counts toward your overall budget. Include these smaller fees and purchases into your budget to ensure you track all the money you spend.

Use a money management app or spending tool to keep track of your holiday purchases. You can quickly assign each charge to a specific category when going through your expenses. The app will automatically include it in your holiday budget, so you can see exactly how much you’ve spent so far.

If you’ve spent more than expected, it may be a sign that you need to rein in your spending before you go over budget. Many apps will also alert you if you go over budget, so you can stop spending immediately.

Resist the Urge to Shop for Yourself

You’re bound to encounter all kinds of desirable items while you shop for everyone on your list, but you should resist the urge to buy things for yourself if you are trying to stick to a strict budget. Anything you buy for yourself should count towards your holiday budget.

If you feel tempted to buy something for yourself, wait until after the holidays to see how much money you have left. If you come in under budget and have extra money, reward yourself with a gift.

Take Advantage of Seasonal Deals and Discounts

Prices tend to go up closer to the holidays, so consider booking your flight or buying gifts sooner rather than later. But the holiday season tends to be full of deals and discounts that might save you money depending on when you buy.

For example, many stores offer some of the biggest discounts of the year on Black Friday, the day after Thanksgiving. This can be your chance to snag items for much less than you would normally pay. Look for Small Business Saturday and Cyber Monday deals to save money when shopping at local, independently-owned stores or online. 

Try to time your purchases so that you spend as little as possible. You can use price tracking tools online for everything from airfare to the latest toy or gaming system to see if prices are going up or down.

Preparing for Next Year

Many of us don’t start thinking about the holiday season until we start hearing that special music on the radio and start seeing the decorations pop up in stores. However, much of your holiday budget can be determined by what you do the rest of the year.

To better prepare for the holidays, set aside money every month in a savings account dedicated for holiday spending. Start thinking about gifts and spending early so you can take advantage of sales and discounts throughout the year.

If you felt like your budget was tight this season, start saving now so you can worry less and enjoy the season next year.

The holidays tend to be the most expensive time of the year for many Americans. Despite this, you should be able to enjoy getting together with your loved ones instead of worrying about money. Create a budget and avoid spending money on non-essential items to avoid going further into debt.

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