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holiday spending

How to Keep Your Holiday Spendings in Check

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Even the most frugal people can lose their minds when the holiday season rolls around. When financial obligations start to pile up at the end of every year, it’s easy to just put everything on a credit card and deal with the aftermath in the new year. Just like you did last year when you promised to do better next year! 

But when you start every year with a mountain of debt, it’s nearly impossible to make any real progress on your financial goals. Also, can you really be relaxed, grateful, and happy when the consequences of overspending on holiday gifts are right around the corner?

That’s why this year, you should commit to a better money management strategy for the holidays. Here’s how to do it.

The Financial Stress of Buying Gifts

According to a 2017 MagnifyMoney survey, the average American consumer takes out $1,054 in debt to pay for the holidays. Half of the people surveyed said it would take three months or more to pay off that balance from their savings account, and 10% said they could only afford to make the minimum payment. Paying off $1,054 with a $25 minimum payment would take five years and one month, costing $452.69 in interest. That’s almost half of the original balance!

The key to avoiding this situation is an airtight budget. By planning for expenses and adding a buffer to your budget, you’ll be able to better prepare. Whether that means cutting out low-priority costs or finding a way to scrounge up more money, the first step is to lay it all out in front of you. Make sure to give your budget room to breathe in case a surprise holiday party or gift comes up.

How to Budget for Holiday Shopping

Make a list of every holiday-related event and obligation you have, from flying home to your grandma’s for Thanksgiving to buying presents for your niece and nephew. Don’t forget to include the little things, like the office White Santa gift exchange, Friendsgiving dinner, and the neighborhood Christmas party.

Next, write down an approximate cost for each event and add 10%, which will give you a small buffer in case you end up spending more. Add up the total cost. 

Then, go through your current budget to see how much you can reasonably afford to spend on the holidays without going into debt or skipping a retirement contribution.

If you’re like most people, how much you can afford to spend is probably less than the total cost of those activities. Now it’s time to make a choice: do you try to earn more money in time for the holidays, or do you pare down those expenses?

Earn more money

If cutting back on Christmas splurges isn’t an option, consider some ways you could make more money:

  • Sell things around your house on OfferUp, Craigslist, Facebook Marketplace, Decluttr, or eBay
  • Consign clothes you no longer wear
  • Look for unused gift cards in your wallet 
  • Find families who need last-minute babysitters or pet sitters
  • Redeem cash-back rewards for statement credit or gift cards

Spend less

Don’t have any way of earning more spending money? Then it’s time to trim a few things off your list. 

Rank every holiday line item in order from most important to least. Skim over the list and see what you can skip, cut or minimize to reduce your expenses. If you normally spend $100 on your boyfriend, can you ask him if a $50 gift is alright? Do you always buy your parents gifts on top of flying to your hometown? Can you ask to be left out of the gift exchange this year?

When possible, try giving experiences rather than gifts. Millennials in particular love experiences, so don’t worry about a gift if you can give them a memory or event instead. Offer to take everyone ice skating or organize a Christmas cookie decorating party. Spending $10 on ice skating admission will yield far better memories than a $10 gift.

When you do shop online for gifts or travel deals, use browser extensions like Honey or coupon sites like Groupon to save money. Every little bit helps. 

Some people will be less than understanding about your decisions, but that’s the price of going against the grain. When going into debt every year is the norm, making responsible financial choices seems strange. Just stay the course, and politely explain your reasons to anyone who asks.

Shop smarter

The holidays are a known event each year, so if you know you have some big expenses coming up you could start planning in advance and watch for sales to save big. Whether you are lined up outside for a big ticket item on Black Friday, or snuggled at home hunched over a laptop for Cyber Monday, both days can be a great time to stock up on the gifts you will give later that year.

Outside of these two major holidays, there are sales all year and you can set up alerts when online shopping. Your holiday spending plan can also live outside of the holiday season if you really want to get a jump on your gifts in future years. Make a shopping list early in the year and just tick things off as they go on sale. 

Create New Holiday Budgeting Rules for Your Financial Health

Take this year to develop some new holiday rules with your loved ones that are more conscious of everyone’s personal finance goals. If you always go back to your hometown for Thanksgiving and Christmas, cut back to one holiday. You can alternate which holiday you go home for or pick the one that means the most to you. 

A married friend of mine switches which holiday she spends with her in-laws and which she spends with her family. Neither family feels left out because they all get to spend an equal amount of time with her, and at this point, they’ve grown accustomed to the tradition. 

If gift giving is an issue, talk to other family members about setting hard spending limits or picking a specific item to give, like a bottle of wine. One of my friends does a Secret Santa six-pack exchange with his extended family. Each person draws a name and buys a six-pack of craft beer for their recipient. They pick a day near Christmas to exchange their gifts and spend the evening sampling everyone’s beer. Because beer costs around the same price, no one shells out more than their fair share. 

For families with a lot of kids, talk to the other adults about skipping gifts for anyone older than 21, or picking one child’s name and gift list. In my personal experience, kids barely remember what you’ve gotten them. 

Managing money around the holidays is sometimes a question of managing feelings. Will your friends or coworkers care if you have to opt-out of their White Elephant tradition? Maybe. But if you explain that your bills are piling up and you can’t participate without being stressed out, they’ll understand your financial decisions. Anytime someone has told me they can’t afford to do something, I’ve always understood. Your family probably will too.

Conquer your student debt. Refinance now.

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Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.