The cheerful joys and celebrations of the holiday season with friends and family getting together around Christmas lights and exchanging gifts make it the most wonderful time of year.
But it also comes with the urge and temptation to spend more, making it easy to wind up in debt which isn’t easy to wipe out from your credit balance.
The average shopper will spend at least $900 on the holidays. Much of it will be charged on that plastic card that attracts a high-interest rate.
Being careful by planning your holiday spending means you won’t overspend and end up stressed.
What can you do to have a wonderful holiday experience without running up massive amounts of debt?
We brought together several industry experts offering their tips and strategies to help you stay out of debt during the holidays.
1. Set a Budget
a. The first step you need to take to have a debt-free holiday is to set a realistic budget that works for your current situation. It was a hard year for many of us and if we need to cut back and adjust our budget that is something we have to do. Keep gift-giving to a minimum and get creative with your gifts. Make something homemade or bake something instead of buying gifts. Find ways to show your love without buying anything. For example, you could offer your time and help someone with a project if money is tight.
– Kelan & Brittany Kline, blogger/owner of the savvy couple
b. To avoid debt during the holidays, it’s best to create a holiday budget that includes all the extra money you’ll be spending during the holidays (things like gifts, food, decorations, etc.). Most people spend money on these things but they don’t really have any plan for the money and they don’t know how much they can comfortably spend. Take a look at your finances and determine how much you’re able to spend, start with the overall number, and then work backward to create a budget that includes each line item and the amount that you’re budgeting for it”.
– Marc Andre, founder of Vital Dollar
c. The best way consumers can experience a debt-free holiday is to make a budget spreadsheet to track their income and expenses. Consumers can start by looking at their last three months’ income and expenses and organize them on a spreadsheet.
Then, determine their needs and wants. Needs are things like rent, mortgage, insurance, and so on. Wants are things that make us feel like we’re keeping up with the Jones’s, such as that fancy new German car parked out front. And then, they can decide the best place to spend their funds for the holidays.
– Rick Orford, best-selling author, personal finance expert at the financially independent millennial. com
2. Use Cashback Rewards
a. Don’t forget things like extra goodies around the house, wrapping paper, etc.
If you’re hosting a holiday dinner, stock up on pantry staples when they go on sale, weeks before the big day. And for presents, keep your list of “want to buys,” and check it twice to buy what’s on sale. I like to use Rakuten to help get cashback on online grocery purchases, which I do the majority of the time!
Rakuten link is a referral bonus.
– Rachel Smith, owner of budgets and kale
b. From now until the holidays, make sure you’re maximizing rewards when buying everyday essentials by using a credit card that offers cashback. This is also a good time to sign up for a new credit card that offers a sign-up bonus. For example, the Chase Freedom card offers $200 back when you spend $500 in the first 3 months. Since you’re going to be spending money during the holidays anyway, take advantage of this free cash deal and apply it as a statement credit to pay for on-going purchases, or pay down holiday debt! Compare cashback cards at Card Rates. com for detailed reviews and sign up bonuses.
– Andrea Woroch, consumer saving and money-saving expert at andrea woroch
3. Plan Ahead of Time
Holiday spending often comes as a surprise to us because it’s not something we typically budget for. But it really doesn’t have to be such a stressful rush every year, and you don’t have to rack up debt just to show your family and friends you care. The same holidays repeat themselves literally every year, so why not plan for it? It’s too late to change this year, but we can (and should!) start planning for next year.
But it’s impossible to effectively plan if you don’t have a baseline (aka understanding this year’s spending). So here’s how we are going to plan for next year (and the years to come):
– Write a list of every gift you bought this year — who are they for, and how much do they cost?
– What’s the total cost of all of the gifts you gave?
– Now ask yourself…how do I feel about that spending level? Was it too much? Too little? (But be realistic…if you spent $400 this year, it’s probably not practical to decide that next year’s goal is $40).
– Personally, I then add in a little extra wiggle room. You never know how many new people will enter your life next year, so you don’t want the budget to be too tight.
– Choose next year’s spending target
– Divide your total holiday gift budget by 12. (If the total is $400, that means $34/month)
– Open an extra savings account and set up an auto-transfer for that amount
And…That’s literally it! You’re done! $34/month is so manageable, and worlds apart from scrambling for $400 next December — or more likely, going into debt just to pay for the holidays.
– Kate Grayson, money coach at beyond money. co
4. Increase Your Budget With a Flexible Side hustle
No matter how much you try to cut back, you may not have enough for all those holiday expenses which can add extra stress during this already anxious time. However, there are ways you can make extra cash. For instance, you can make up to $1,000 a month by pet sitting in your home while working remotely through Rover. com and the pet companionship will help ease the stress, too! Or, run other people’s errands and find odd jobs like yard work or helping build IKEA furniture through Task Rabbit. com. This is also a good time to sell items you no longer need or use like outgrown kids’ clothing, toys, home goods, and electronics (like your old smartphone). The extra money you make can pay off debt and afford other purchases.
– Andrea Woroch, consumer saving and money-saving expert at andrea woroch
5. Pay in Cash or pay off your credit card bills in full
You can stick to your budget by paying with cash for your holiday gifts.
This way you can see how much money you have remaining after each purchase.
You also won’t be tempted to overspend when you have allocated a specific amount of money upfront.
If you choose to use a credit card, be sure to pay off the balance in full each month. This way you can prevent yourself from paying interest charges as they can be hefty and accumulate quickly.
– Sandy Yong, award-winning author/investor/speaker at sandyyong.com
6. Be Strategic on Where You Shop
Buying brand-new, full-price items from your local big-box store might seem tempting, but there are plenty of other places to purchase gifts on a budget.
Try Facebook Marketplace or another online marketplace, especially if you’re shopping for furniture or general housewares.
Careful shoppers can often get great products at shockingly low prices (particularly if you’re happy to haggle). Just be sure to shop carefully -keep an eye out for scams, and if you’re picking something up in person, bring someone you trust along for the ride.
Shopping for clothes? Browse resale apps like Poshmark. Like Facebook
Marketplace, Poshmark is a great place to find high-quality products at prices much lower than you’d see in-store.
– Sean Messier, associate editor at credit card insider
7. Cut down Your Costs
You can look for places in your current budget to cut costs. For example, maybe you can lower or pause your subscription services to things like Netflix, cable, or any similar services. You can also buy what is only necessary for groceries and shop around for bargains and take advantage of coupons stores regularly offer. Another option is to shop around or negotiate a lower auto, home, life, or renters insurance as you can potentially save money in these areas, and is relatively easy.
– Jacob Dayan, Co-founder & CEO at communitytax.com
8. Avoid Impulse Shopping
It’s easy to fall into the trap of holiday sales that offer up to 80% discounts. That can be problematic because it can lead to a pile-up of credit card charges that you didn’t know were already pulling you down big time.
So if you can, try to avoid any impulse shopping. Don’t let yourself get wooed by those special deals. Unless it’s something you need, it would be a wiser decision to just skip it.
– Sam Lowy, CEO / Insurance Agent at life insurance star. com
9. Make Sacrifices
Times are hard and certain sacrifices need to be made. Part of the sacrifice is gifting yourself a present. This year, you may want to skip that, unless the gift you want is simple enough to not cause a dent in your bank account.
If you want something a bit pricier, leave that to friends or loved ones to give to you.
– David Meltzer, CEO / Owner at east insurance group. com
10. Divide purchases into 2 categories and co-operate with others
One would be purchasing that are better made in advance (for example, the garlands for the Christmas tree would definitely be cheaper after the New Year. Actually, it’s the best period to buy them because the shops will try to get rid of them at the lowest cost).
Number two would be the purchases that are better to be bought right before the holidays. E.g. if you want to buy a smartphone or a laptop as a present, it’s better to wait for December when the usual New Year and Christmas discounts will arrive. Everything that can be a present is cheaper right before the holidays because shops try to gain through the number of customers.
Co-operating with several friends to buy a present will allow you to purchase something beneficial and surprising without overspending.
– David Sharkovsky, finance expert, psychologist, CM of informational financial service at Financer. com
11. Set the right expectations with your loved ones
If you’ve been a big spender for prior holidays, share that you’re moving in a new direction, outline your steps and invite them to do the same. Maybe decide to do a Secret Santa so that each person is responsible for giving a gift to one person instead of all family members. Or even a white Christmas where there is a limit on the gift and the game allows for the person in sequence to keep their gift or exchange it for a gift that has been opened by another person in the game.
– Lazetta Braxton, Certified Financial Planner at 2050 wealth partners. com
12. Don’t give gifts without a heart.
Be deliberate and give with love.
Give the gifts that people want or need. Whether it is as small as basic household gifts, that sweater someone has been eyeing, or even just the gift of quality time; make an effort to give with love. You will end up making the most out of what you spend.
– Jessica Caver Lindholm, Personal Finance Expert at to living free. com
13. Save periodically
Determine the monthly saving amount to prepare for the holidays. For example, if the holiday budget is $1,200, you would need to save $100 each month before the holiday.
– Cassie Ferrer, Best-selling author, speaker, founder at numbers nerd consulting. com
As you’ve seen so many strategies from various experts, it’s all about being intentional and responsible with your spending during holiday shopping. This will ensure you experience a stress-free holiday and enjoy it to the fullest.