How to avoid going into more debt this holiday season
Key takeaways
- Start early by creating a gift list, setting spending limits and tracking your purchases to prevent impulse buys and overspending.
- Use cash or debit cards to avoid racking up debt, especially when credit card interest rates are high.
- Consider homemade gifts or group gifts to reduce costs while maintaining thoughtful giving during the holiday season.
Holiday gift-giving can be a joyful experience, but it often comes with the temptation to overspend. If you’re not careful, this can lead to starting the new year with unmanageable debt.
One-third of holiday shoppers are planning to spend less on the holidays this year, and some people are looking for ways to maximize their money for what they do spend. Thankfully, there are plenty of ways to enjoy the holiday season without breaking the bank.
1. Set a budget for all your holiday categories
The first step to avoiding holiday overspending is setting a clear, realistic budget.
Take stock of your current financial situation and plan accordingly. Create a written plan or spreadsheet that details how much you’ll spend in each category. This will keep you accountable when you hit the stores or shop online.
Divide your holiday budget into categories (gifts, food, travel, etc.) and allocate a specific amount for each. Make sure these amounts align with your income and other financial obligations.
Categories to include in your budgeting include:
- Gifts and gift exchanges
- Decorations
- Energy costs
- Travel
- Meals
2. Use cash or debit cards instead of credit
One of the easiest ways to stick to your budget is by avoiding the temptation to use credit cards, which can lead to overspending. Credit cards allow you to push costs into the future, but this can mean starting the new year with high-interest debt.
Instead, stick to cash or debit cards. You can withdraw your holiday shopping budget in cash or set up a debit card limit so you spend only what you have.
Using a form of payment that won’t potentially cost you more in the future is a means of trying to manage debt.
A lot of people will use buy now, pay later services to pay for holiday expenses. If you decide to go this route, make sure you keep track of the total spent so the recurring payments don’t catch you by surprise.
3. Make a gift list and follow it
Impulse buying is one of the quickest ways to blow your budget. That’s why having a detailed gift list is crucial. Much like Santa, you should “make a list and check it twice.” Writing down exactly what you plan to buy for each person helps you stay organized and avoid unnecessary purchases.
Make a list of loved ones in your life, budget for each of them and keep track of how much you’ve spent. This will ensure you don’t fall for winter sales and instead spend only exactly what you plan for.
4. Consider DIY or homemade gifts
Homemade gifts can be more meaningful and often less expensive than store-bought goods. DIY gifts are a great way to show thoughtfulness without going over budget, from baked goods and personalized crafts to artwork or knitted items.
Explore Pinterest or YouTube for ideas on homemade holiday gifts. Choose items you can make using supplies you already have or those that cost significantly less than a traditional store-bought gift.
5. Track your expenses in real-time
It’s easy to overspend if you’re not actively keeping track of what you’re buying. Use a budgeting app or a simple spreadsheet to track your holiday purchases as they happen. This helps you stay within your budget and gives you a clear picture of how much you’ve spent vs. how much you have left.
Set up a dedicated holiday spending tracker and log every purchase immediately. Some budgeting apps, such as Mint or YNAB (You Need A Budget), automatically categorize spending and can alert you when you’re nearing your limit.
6. Avoid store credit cards
Store credit cards often entice shoppers with upfront discounts, but they can come with extremely high interest rates. While it may seem as if you’re saving money on that initial purchase, carrying a balance on a store card can quickly outweigh any savings you got from the discount.
If you’re tempted to sign up for a store card, calculate how much interest you’d pay if you don’t pay off the balance immediately. Stick to your debit or cash payments instead.
7. Start shopping early
Shopping early allows you to compare prices, wait for sales and avoid last-minute rush purchases that can lead to overspending. By spreading out your purchases over a few months, you can better manage your budget and avoid a huge financial hit in December.
Set up price alerts for the items on your list. Many apps and websites, such as Honey or CamelCamelCamel, can notify you when a specific product goes on sale.
8. Be strategic about sales
Black Friday, Cyber Monday and other seasonal sales are great opportunities to save money—but only if you’re careful. Don’t buy items just because they’re on sale. Keep your budget in mind, no matter how good the sales are.
Before you shop, check your list to ensure the items you plan to purchase are discounted during the sale. Avoid buying things you don’t need just because they’re heavily discounted.
9. Use coupons and discount codes
You can find coupons and discount codes for nearly everything online. Before making any purchase, do a quick search to see if there’s a coupon or discount code available for the item you want to buy. Many retailers offer free shipping codes, percentage discounts or promotions that can help you save.
Use a browser extension such as Honey or RetailMeNot to automatically find and apply coupon codes at checkout.
10. Shop secondhand or thrift
Gently used items from thrift stores, secondhand shops or online marketplaces like Facebook Marketplace or eBay can be great gift options. Many items, including books, clothes and even electronics, are available in near-new condition at a fraction of the original cost.
Consider browsing local thrift stores or online resale platforms for unique and affordable gifts.
11. Consider group gifts
Instead of buying individual gifts for everyone, consider pooling resources with family members or friends to buy one larger, more meaningful gift. This reduces the overall cost for each person while still providing a thoughtful present.
Coordinate with others to purchase a shared gift for someone special. This is particularly effective for presents for parents, grandparents or siblings.
12. Take advantage of cash-back offers
Some debit and credit cards offer cash-back rewards for specific purchases or during holiday shopping seasons. By using cards that give you a percentage of your spending back, you can offset some of your costs.
Check your cards for cash-back offers or consider signing up for cash-back apps such as Rakuten or Ibotta.
13. Be smart about travel costs
If holiday travel is a part of your plans, be smart about how you book your flights, hotels or rental cars. Use price comparison websites to find the best deals and book early to avoid last-minute price surges. Consider flexible travel dates to save on flights or hotels.
You can also use travel reward points or frequent flyer miles to cover holiday travel costs. Book during off-peak times to get the best rates.
14. Plan for next year
The best way to avoid financial stress during the holidays is to plan ahead. Start saving for next year as soon as the current season ends. Set aside a small amount each month so you’ll have a cushion when the holidays roll around again.
Consider setting up a holiday savings account and automating monthly transfers to it. Even small amounts can add up over the course of a year.
The bottom line
By planning ahead, setting a budget and being mindful of your spending, you can enjoy the holiday season without the stress of overspending or accumulating debt. These actionable tips will help you navigate the festive period while keeping your finances in check, ensuring you start the new year on solid financial ground.
