6 Ways to Stick to Your Holiday Budget This Year

In 2020, a survey from the National Retail Foundation reported that Americans planned to spend, on average, $997.79 for holiday gifts, get-togethers, and related expenses.

But one in five people went into debt as a result of their 2019 holiday spending.

So — while December may be a merry time of abundance — for many people, holiday spending leaves a nasty financial hangover in January. With inflated credit card bills rolling in and less money in the bank, Americans often find themselves starting a brand-new year in less-than-ideal financial circumstances.

This year, give yourself the gift of healthier money habits when it comes to your holiday spending. Try these six strategies to help you stick to your holiday budget:

1. Create a holiday-specific budget

At the year’s end, it’s easy to lose track of your spending amid all the hustle and bustle. You’re buying gifts, hosting family, paying for travel, and more. But putting together a straightforward holiday spending budget can help you plan and stay in control of your finances during this busy time.

Start with a single number — the dollar amount you’re willing to spend this holiday season. Then split up that figure into broad categories. How much will you put toward gifts, décor, hosting, special meals, and travel expenses?

Include any costs you anticipate having. Don’t forget the extras that add up, like stocking stuffers, a Christmas tree, gift-wrapping supplies, your family’s holiday card, sales tax, and shipping. (If you have to pay to ship presents or spend on expedited mailing, those amounts could eat substantially into your holiday budget.)

Once your categories are listed out, break down every separate expense. If you find that your intended expenses exceed your spending cap, you’ll need to decide whether you’re willing to increase your holiday spending or you need to scale back in some area.

2. Get creative with your gift list

An essential element of your holiday budget is a detailed spending plan for each gift recipient on your list. Start by listing out each individual. Think of everyone to whom you’d normally give a present — even a small one. That might include family, friends, your kids’ teachers, coworkers, the mail carrier, your hairstylist, the office’s White Elephant gift exchange, etc.

Then split your gift-giving budget across your pool of people. At this point, you may need to make some decisions. Which recipients should get more expensive gifts? Should you cut people from your list so you have more to spend on the remainder of recipients? Should you spend less on each person to avoid overspending on the group as a whole?

If you need to scale back on the number of people to whom you give gifts, you might eliminate one group entirely. For instance, keep giving gifts to the kids but stop exchanging presents with the adults in your family. Or agree as a group to do a Secret Santa, so everyone buys just a single gift.

3. Take advantage of savings opportunities

If you plan ahead, it’s easy to find great deals that allow you to stretch your budget further. So you can buy gifts for more people — or get what might otherwise be more expensive gifts — while sticking to your holiday budget.

Sales days are an excellent place to start. Scope out ads for Black Friday and Cyber Monday well in advance. That way, you can grab the deals you want before they sell out.

In addition, look for coupons and promo codes before you purchase a gift. Take advantage of loyalty rewards programs and rebates that save you money at specific retailers. Check for special discounts available to the organizations of which you’re a member — maybe AAA, an alumni association, or a professional group.

Consider purchasing discounted gift cards through a reputable site. Offer them directly as gifts, or use the cards to make holiday purchases while saving money. You can even sell your own, unwanted gift cards to bring in some extra cash.

Take advantage of free or reduced shipping whenever you can, so you have more to spend on the gifts themselves. And don’t forget to comparison shop to get the best rates. There are plenty of apps, browser extensions, and websites that make the process quick and easy.

4. Keep tabs on spending

Of course, your holiday budget won’t be very effective if you write it down and stash it in a drawer. Staying on plan requires you to track your spending — and make adjustments as needed — as you head into the holiday season.

Keep the process simple so you’re able to stick with it. For you, that might be paper and pencil, a basic spreadsheet, or an app that does the work for you.

For each line item in your holiday budget, write down the expense (e.g., gift for Mom), the amount you’ve budgeted, the amount you actually wind up spending and the difference in those two prices.

Then, it’s easy to see at a glance if you’re staying on track or going over budget in real-time. If you wind up paying more than you’d anticipated in one area, notch down your planned spending on other expenses, so you stick to your overall budget. And — if you spend less than what you’d planned — you can put that extra cash toward another area or save it in the bank.

5. Forget about keeping up with the Joneses

The holidays can come with some unspoken social pressures or even pressure you put directly on yourself. But holiday spending isn’t a competition. And you don’t need to match anyone else’s spending or their expectations for what you should spend.

So be true to your budget and your financial reality without guilt. Keep this in mind:

• Don’t force yourself to buy gifts equal in value to what other people are able to give you.
• Don’t feel compelled to throw the party of the year when it puts you into debt.
• Don’t push yourself to outdo the neighbor’s elaborate holiday light display.
• Don’t pay for travel expenses that blow up your budget.

Remember: The holidays end by December. But debt can take months or even years to pay off — all while costing you even more money in interest and fees. Owning your financial truth — and enjoying your holiday! — is ultimately a far better path than taking on debt you don’t need or even want.

6. Plan ahead for next year

Holiday spending can easily blow your usual monthly budget. And that may leave you dipping out of necessity into your emergency savings or taking on unwanted debt.

Instead of taking the hit all at once, consider spreading the cost over the entire year. Just add one line for holiday saving to your monthly budget and set up a dedicated savings account.

Then, each month, deposit a fixed amount into that savings account. (Most banks allow you to automate a recurring transaction that will allow you to save regularly.) When December rolls around, you’ll have all the cash you need readily available for your holiday expenses.

Want to give your holiday spending budget a little boost? Bump up the amount you save to your holiday account each month. Or make some one-off deposits when you find yourself with extra money coming in — a tax refund, cashback from your credit card, a bonus from your job, or income from a side gig.

So, this year, how will you approach your holiday spending? With a little planning, you can enjoy that special time of year without the money stress. And you can start your new year in a place of even better financial health.