The holidays can be the most magical time of the year, as well as the most expensive, if you’re not careful. In 2018, the average shopper spent $990.85 on the holiday season. Total holiday spending in 2018 was $704.5 billion, an increase of 3.3% from the previous year.
While holiday spending is often unavoidable, it doesn’t have to break your budget or leave you with a mountain of debt. The trick is to make a plan for spending before the holidays start. That way, you know exactly how much you can afford to spend, who you’ll be buying gifts for, and exactly where your money is going to go.
Not sure where to start when getting ready for the holiday season? We’ve put together an action plan to help you prepare for the holidays early and avoid holiday debt.
To prep for holiday spending, first make a list of what you need to buy or spend money on during the season. That way, you can figure out where to cut back if needed or what you can safely eliminate altogether to keep yourself on track. Here are some ideas.
Where will your money go this holiday season? Gift-giving tends to be one of the biggest spending categories for people during the holidays, but it’s not the only category. Below are a few other common expenses you could run into during the season.
Now that you know what you’ll be spending money on during the holidays, the next step is deciding who you’ll buy gifts for. You may want to consider some of the following people.
During the holidays, it’s customary to tip certain people as a way of saying thanks for helping you out over the year. It might be a good idea to have a separate list of people you want to tip during the holidays. Here are some of the people you may want to consider including on your list.
Whether to tip or not during the holidays depends on a few things. If you use a person’s services regularly, it’s usually a good idea to give an extra tip at the holidays. For example, if your hairstylist does your hair every week, you might give them a tip worth the cost of service during the holidays. If you only go in for a haircut a few times a year, you can usually skip the holiday tip.
You’ve added up the cost of your holiday-related expenses, the cost of your gift-giving list, and the cost of holiday tipping, and it was more than you expected. What can you do to get your spending in check?
One reliable option is to set a spending limit for each gift recipient. For example, you might decide to spend no more than $25 on each of your friends or on your parents, siblings, or nieces and nephews.
It also helps to look for ways to trim your budget. You might take people off your gift list or look for other ways to cut your holiday expenses.
Once you have an idea of how much you’ll be spending this holiday season, the next step is to make a plan to save for those expenses. To better prepare for holiday spending, start early and save a small amount each month toward your goal.
Where should you put the money you’re saving for the holidays? So that you aren’t tempted to spend it on other expenses, it’s a good idea to set up a separate savings share. To make the process of saving as easy as possible, you can schedule automatic deposits into the account each month.
While saving for the holidays in advance can help you avoid debt and can take some of the sting out of holiday spending, you might be wondering where you’ll find the extra money each month to set aside. Depending on your income and monthly expenses, you might have to look at your budget and find ways to cut your spending. You may want to start with some extraneous expenses, like the following.
When it comes to gift-giving, it’s the thought that counts. You don’t have to spend a lot on each person on your list. Homemade gifts are meaningful and may cost less than storebought gifts.
If you’re stumped for homemade gift ideas, you can try the following.
In some cases, your family members, coworkers, or circle of friends might be happy to do away with the gift exchange entirely. You can substitute gifts with a shared experience or by making a group donation to charity. Some experiences you might try include:
Along with starting to save for the holidays early in the year, it can be helpful to begin making holiday purchases well before the season starts. When you get a jumpstart on your holiday shopping, you might find that your shopping experience is more pleasant and relaxed.
There’s less pressure on you when you start holiday shopping early. If the toy you want to get for one of your children is out of stock, for instance, you have plenty of time to put it on backorder or to wait for it to arrive. You also don’t have to worry about paying extra for expedited shipping, as items will have plenty of time to arrive. Depending on when and where you shop, you might find that the discounts and deals available are better early on compared to Black Friday and other holiday-related shopping days.
Every year, there are some big sale days or big sale weekends that don’t get the press or attention of Black Friday. Based on when you start your holiday season prep, you might be able to take advantage of the following sale periods.
If you don’t get all of your holiday shopping finished before the season starts, you might plan to shop on the following days, based on where you’re purchasing from:
Is that Black Friday bargain really a bargain? In the excitement and hype leading up to the start of the holiday shopping season, retailers often make their deals seem greater than they are. While a 60″ flatscreen TV on sale for $100 seems like it’s too good to pass up, it’s helpful to consider the actual cost of getting that $100 TV.
Will you have to camp outside of the store overnight — in November? Will you be battling with hundreds of other shoppers who all want the same item? What else will you have to do or buy to get the special price?
To avoid getting sucked into nearly too-good-to-be-true holiday deals, it’s a good idea to make your list and stick to it. If you don’t need the $100 TV, there’s no reason to give up a warm and cozy Thanksgiving evening at home with your family to camp out for it.
Also, keep in mind that retailers will sometimes inflate the discount to make a deal seem more appealing. A TV that usually retails for $300 might suddenly have a retail price of $600 when it’s marked down to $200. Marking up the “suggested” price to $600 makes you think you’re getting a better deal than you are.
Before the holiday shopping season gets underway, research the price of the items you have on your list. When sales come up, pay attention to how much things are marked down and purchase from the retailer who’s really offering the best price.
Sometimes “free” shipping isn’t free. Many retailers will ship items for free, but only on orders above a certain amount. If your order total is considerably less than that amount, you may prefer to pay for shipping or delay your purchase until you have more things to buy.
For example, your order is $20, the free shipping minimum is $50, and shipping costs $5. It makes more sense to pay the $5 rather than try to spend $30 on things you don’t particularly need or want to buy. But if your order is $20, and the minimum for free shipping is $25, you might be better off buying something for $5.
Know what you’re paying for and what you’re getting when you make a purchase. In some cases, a retailer might add extras you don’t want or need, but that you have to pay for. Read the fine print to make sure you aren’t paying extra for:
If you see any “extras” added to the price of the item, ask the retailer to remove them before you finalize the purchase.
You don’t have to stick to using cash only to avoid going into debt over the holidays. Using a credit card can be a smart way to get the most out of your holiday shopping.
One way to do this is to use a rewards credit card for every purchase you make. A rewards card allows you to earn money after you spend it.
There are many rewards cards out there, but not all of them are created equally. Look for a rewards card that offers the following.
As you gear up for holiday spending, you might be wondering if it’s a good idea to get a store credit card from retailers you shop at the most. While store cards typically offer a sign-up discount and the opportunity to earn rewards, they do have their drawbacks. The interest rate is usually much higher compared to a credit card you’d get from a credit union or bank. Plus, you often can only use the card at one retailer or a family of retailers.
Planning for holiday spending is just the first part of the equation. The next part is to stick to the plan to keep your spending in check and to make sure you follow your budget. Below are some tips to help you stay mindful of your spending and avoid going over budget during the holidays.
It’s possible to celebrate the holidays without ending up in debt. Whether you’re interested in opening a savings share to help you build your holiday nest egg over the year, applying for a home equity line of credit (HELOC) to help cover some of the expenses, or choosing a credit card that offers cash rewards on every purchase, we’ve got you covered. And if you find yourself having spent more than you planned, look for ways to save on your credit card payments by learning more about our balance transfer options.
Check out our WalletWorks page for more financial tips for the holidays and beyond.