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The holidays can be incredibly expensive — that’s the way the (Christmas) cookie often crumbles.
The average shopper spent around $830 last holiday season, according to the National Retail Foundation. That’s quite a bit of cash, especially since many Americans have little to no savings.
Making a plan now can help avoid a holiday debt hangover. These tips can help you estimate your expenses and build a holiday budget — and actually stick to it.
1. Get realistic
When the holidays roll around, it’s easy to get carried away and pull out all the stops to make your loved ones happy. But be realistic — your wallet will thank you for it.
Take a second to set your holiday budget. Review your finances and determine how much you can comfortably spend. Consider all your spending, including gifts, decorations, travel expenses, and entertaining. Having a clear budget in mind will help you make better decisions and avoid impulsive purchases.
If you anticipate spending a lot during the holidays, having a separate savings fund for those expenses is a good idea. You can set that money aside in a high-yield savings account. You can contribute to your holiday savings account throughout the year, so you’ll have enough money saved when the time comes. Plus, with a high-yield account, you’ll earn interest on your savings all year long.
2. Start booking your travel now
Some holiday expenses are unavoidable (and quite expensive). Travel costs are often the biggest one.
Airline prices for travel are notoriously higher during the holiday season. While you may not be able to avoid getting on a plane, when you plan your flight (and when you book) can make a big difference.
Ticket prices usually increase as more travelers book their trips and flights sell out. If you already have your plans set, you should book ASAP.
Shop around for the best deals on flights, accommodations, and transportation. If your plans are flexible, consider traveling during off-peak times or shift your itinerary around based on prices. If your credit card comes with travel rewards, you can use them to offset costs.
3. Hunt for sales early
Starting your holiday shopping early gives you more time to hunt for sales. By seeing how much certain items cost now, you can figure out how much you will spend during the holidays. Consider using price comparison websites or apps to find the best deals.
Start by listing all the people you want to buy gifts for. Research how much each item will roughly cost and assign a spending limit to make sure you stay on budget. Remember, the value of a gift lies in the thought and sentiment behind it, not the price tag.
It also helps to buy your gifts over a longer period instead of all at once, says Lance Elrod, certified financial planner at Next Step Financial Transitions.
“If you wait until December to start buying all of your gifts, this could be a large shock to your spending plan and end up putting you into unwanted credit card debt,” he says. “If you break out your gifts over the last few months of the year, it makes the total you spend on gifts more bite-sized and allows your budget to absorb this added expense easier.”
4. Embrace the potluck
Hosting large holiday gatherings can be a drain on your budget. Instead of buying everything yourself, consider a potluck.
The idea of a potluck is simple: Everyone who attends brings an entree, side, dessert, or drink to the party. Everyone contributes, and the financial burden is more evenly distributed.
Potlucks save money and create a sense of community and variety in the meals.
People often bring their favorite dishes or ones in their family for generations. With each dish, there’s usually a story to tell. Learning the history behind each person’s contribution can bring everyone together in a new way.
5. Swap instead of shop
What if you prioritized quality over quantity when it comes to gifts? Instead of buying presents for each person, try proposing a white elephant or a gift swap. This reduces the number of items on your overall gift list.
For example, with a clothing swap, everyone might bring a new or lightly used item they no longer want or need. Everyone lays out their items at the swap, and each person can see others’ contributions. If you and another person agree, you can exchange items.
A white elephant is similar, but you usually buy one gift to be exchanged during the party. There’s also usually a reasonable spending limit, like $25.
These two approaches are ideal for big groups, helping everyone avoid overspending on gifts. It’s often a more sustainable option than buying many items someone may not want or need.
6. Get creative with gifts
For most, buying holiday gifts from stores or online is the default. This can get expensive quickly. This year, instead of filling up your online (or physical) cart, consider getting creative.
Consider adding a personal touch to your gifts by opting for do-it-yourself projects. Handmade gifts not only have sentimental value but can also save you money. Get creative and explore DIY ideas, such as homemade candles, personalized photo albums, or baked goods. These unique gifts will be appreciated by your loved ones while keeping your budget intact.
Making your gifts is more time-consuming and may feel daunting, especially if you don’t consider yourself the artistic type. But remember: It’s the thought that counts.
7. Use loyalty programs
One major way to save on holiday shopping (or at least get something back) is by taking advantage of rewards, credit cards, and store loyalty programs.
The best credit cards for holiday shopping help you earn discounts, points, or cash back on your holiday purchases and save money. Certain stores may offer holiday discounts or free shipping as part of their loyalty program.
Before you sign up, review the terms of the program or credit card. Certain store credit cards, for example, come with higher interest rates and fees that can quickly lead to debt if you aren’t careful.
8. Limit non-essential expenses
It’s easy to get carried away with spending during the holiday season — from eating out frequently to attending numerous parties to buying unnecessary decorations. Set limits on these expenses to ensure they don’t exceed your budget. Focus on experiences and quality time with loved ones rather than material possessions.
It’s also important to keep track of your expenses throughout the holidays. Use budgeting apps or create a spreadsheet to monitor your spending. This way, you’ll be able to identify any budgeting pitfalls and make adjustments as necessary. This practice will keep you accountable and help you stay on track with your financial goals — during the holiday season and beyond.
The bottom line
The holidays can be one of the most expensive times of the year, but it doesn’t have to be. Taking the proper steps can help you keep your spending under control.
First, set up a budget as soon as possible and start planning early. This will help you get a sense of your holiday spending. Consider alternative arrangements like potlucks, clothing swaps, and DIY gifts to save money. Also, don’t forget to review your credit card’s rewards — they may come in handy while shopping.
Opinions expressed are author’s alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.