Fall brings with it the unofficial start of the holiday season. And no matter what holidays you celebrate, these big days come with plenty of pressure to overspend.
Whether spending more than you can afford on gifts, shelling out big bucks to take a winter-break ski trip, or spending end-of-the-year
bonuses before you receive them, you can inflict plenty of pain on your finances during the holiday season.
Fortunately, you can also avoid these mistakes and reach the new year with a solid nest egg of savings and less credit card debt.
How? Read on for our trips on how to keep your finances jolly during the holiday season.
Holiday spenders
Many consumers spend big during the holiday season, a time of year that unofficially starts with Halloween.
A
survey by PowerReviews found that 28% of consumers plan to spend $101 to $250 or more on Halloween alone this year. PowerReviews reported an additional 17% plan to spend $251 to $500 and 7% expect to spend from $501 to $750.
And that’s not even the busiest time of the holiday season. During the November and December holiday season last year, U.S. consumers
spent $936.3 billion on retail purchases, according to the National Retail Federation, a jump of 5.3% from 2021.
That’s a lot of spending. And it’s not easy to resist the urge to splurge when your family members and friends are hitting department stores, buying electronics online, or spending big at the grocery store on frozen turkeys and pumpkin pies.
But the financial mistakes you make during the holiday season can hurt you come January. How to avoid them? Follow our suggestions below for a more affordable and financially healthy holiday season.
9 tips to avoid a financial disaster this holiday season
1. Create a holiday spending budget and stick to it
Determine before the holidays start how much money you plan to spend throughout the season. Be specific Write down how much you can spend on gifts, entertainment, food, meals out, decorating, and travel.
And just as important? Stick to the
budget.
It can be tempting to overspend on the perfect gift, even if that gift comes with a price tag that will bust your holiday spending budget. Resist that temptation: There’s probably an alternative gift with a lower price tag.
2. Start early
The later you start your holiday shopping, the more likely you are to overspend. Why? If you wait until the last minute to shop, you might buy whatever you can to cross people off your gift list, even if that means spending more than you planned.
Instead, start your holiday gift shopping early, long before December rolls around. This will give you time to seek out sales and hunt for less expensive gifts.
3. Keep track of your credit card balances
You don’t want to reach January only to find that you have a five-digit credit card balance. This can happen if you don’t track your credit card spending.
Fortunately, you can easily keep track of your credit card balance by logging onto your card’s online portal. Check your balance every day if you need to. If your balance is creeping up, slow your holiday spending.
You might even consider paying off your credit card balance daily, which is also easy to do by visiting your card’s online portal daily. By paying off your balance in full each day, there’s no need to worry about hitting the end of the holiday season with a mountain of credit card debt.
4. Look for sales, but don’t buy something just because it’s discounted
You can reduce the money you spend by looking for sales throughout the holiday season, not just on Black Friday.
Retailers will hold sales throughout the holidays to encourage consumers to open their wallets. If you hunt for deals, you could shave significant dollars off your gift-giving expenses. Look online, too: Many retailers will offer price cuts on online merchandise.
Just be careful not to buy an unneeded gift just because it’s on sale. If you’ve already bought a gift for your niece, don’t buy another one just because you’ve found a video game offered at a 50% discount. Once you cross people off your gift list, stop spending money on them.
5. Get creative
More people on your holiday gift list, but you’re nearing the top of your spending budget? It’s time to get creative.
You don’t have to buy something for everyone on your list. Maybe you can bake a tray of homemade brownies for your uncle. Your cousin might like a collage of family photos. If you have the talent, you might sew a pair of mittens, or a scarf for your daughter’s piano teacher.
The point? Not every great holiday gift comes from a store. Use your own talents to create homemade gifts to help stretch your gift-giving budget.
6. Try the envelope system
If you don’t trust yourself to stick to a budget, put the credit cards away this holiday season. Instead, withdraw the cash you plan to spend for the November and December holidays. Then, place that cash in a series of envelopes labeled with specific spending categories.
If you pledged to spend just $500 on gifts this holiday season, place $500 in cash in an envelope marked “GIFTS.” If you plan to spend $150 at holiday parties, put that cash in an envelope marked “HOLIDAY PARTIES.” Then, when that cash is gone, you’re done spending in that category.
This can get tricky with online shopping. You can’t spend cash with online retailers. But every time you make an online purchase with your credit card, you can deposit the corresponding cash amount in the bank.
7. Don’t spend to impress
There’s a temptation during the holidays to overspend to impress friends, family members, co-workers, or neighbors.
Say your siblings all spend big on presents for your parents. You might be tempted to splurge on a sparkly necklace for your mom or expensive theater tickets for your dad to keep pace with your siblings. Or maybe everyone at work is spending big dollars to attend a holiday stage production in December. You feel pressured to throw your dollars at tickets, too.
Resist. Don’t overspend just to impress people this holiday season. That’s an easy way to overspend, something you’ll regret come January.
Instead, stick to your budget, buy the gifts, and attend the events that you’ve already planned. If your neighbors are spending big on outdoor holiday decorations this year? Don’t feel that you must join in.
8. Don’t spend your end-of-the-year bonus before you receive it
Is your employer rewarding your hard work with an end-of-the-year bonus? That’s good news. But don’t spend that bonus on your holiday shopping.
For one thing, you might not even receive your bonus until the holidays are over. Never spend money that you haven’t yet received.
Secondly, there are far better uses for that bonus. You can invest it in your retirement or the stock market. You can save it in a CD so that it grows over time. You can use it to pay off high-interest-rate credit card debt. You can save it as seed money for a home-based business you dream of starting.
Using your bonus dollars for holiday presents or to pay for catering a holiday meal? You might regret that move once January arrives.
9. You don’t need to take a holiday break trip
You might see friends or family members jetting off to skiing trips or Caribbean resorts during the holiday season. It’s easy to get jealous. It’s even easier to book your own trip even if you can’t afford it or haven’t budgeted the dollars for a vacation.
If you haven’t planned or saved up for a winter holiday trip, be content with staying home. There is plenty you can do in or near your hometown for far less than the cost of a flight and expensive hotel. And if you really want to travel during the holidays? Start saving today for a trip next season.
