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10 Ways to Avoid Overspending This Holiday Season


The holiday season has become synonymous with giving, receiving, and in many ways, shopping till you drop. Aside from a dip during the Great Recession, we know that annual spending between November and December has increased each year from $416 billion in 2002 to more than $789 billion in 2020.

While it’s easy to get caught up in the excitement of it all, spending to excess loses its luster once the calendar flips to January and the bills start to arrive.

Here are 10 tips to help rein in your expenses this holiday season.

1. Set a Budget

Establishing a personal budget is the first step in responsible money management, whether you’re mapping out monthly cash flow or planning for big-ticket expenses like buying a car or taking a vacation. The same concept applies to seasonal spending.

Start by reviewing what you spent last year — and where — and then list the areas where you expect to put your money this year, including:

  • Gifts
  • Entertainment
  • Meals
  • Travel
  • Donations

Once you divvy up your expenses, estimate how much you can afford to spend in each category and set that as your spending limit.

Many financial planners recommend that you don’t spend more than 1-1.5% of your annual income on holiday expenses. So, if you make $50,000, you should keep your seasonal expenses between $500-750.

Create a personal budget in just six steps to gain lasting control of your finances.

2. Track Your Spending

Make the most of your holiday budget by sticking to it throughout the giving season. To do that, keep track of when, where, and how much you spend — and make adjustments if necessary. It’s fine if your holiday budget remains fluid as long as you stay within the overall limits.  

For example, if you blow past your allocation for holiday meals with too many December lunches at Panera, dial back on other seasonal entertainment and travel. You can use an app or even take notes in an old-fashioned notebook to keep an eye on your spending.

3. Plan Your Purchases

Impulse buys have become part and parcel of holiday shopping, accounting for one in three purchases during the giving season, according to Google. Unfortunately, buying without thinking can upend your budget in a single transaction.

Before heading to the mall, try to have an idea what you want to buy for each person on your gift list. Planning what to purchase — and knowing which retailer or service provider has the best price — will save you time and money. Plus, it will keep you from wandering aimlessly through crowded department stores.

You can also ask your close ones to send you a few options or you can start brainstorming throughout the year.

If you have family members you haven’t seen in a while, arrange to host them at your house for a weekend.

4. Start a Holiday Fund

One of the best ways to manage your seasonal spending is to set up a holiday fund. Put a few extra dollars in your regular savings each week or open a separate account just for the holidays.

Once the shopping season arrives, only use money from your holiday fund to pay for gifts and other expenses. This approach to spending takes time and discipline, but you’ll appreciate not facing a mountain of debt in the new year. 

5. Use Credit Wisely

It’s easy to insert, swipe, or tap to your heart’s content during the holidays, but paying with plastic can quickly get out of control if left unchecked.

A good rule of thumb is to only charge something if you have the money in your checking or savings account to comfortably cover it. This strategy helps you stay out of credit card debt and accumulate reward points.

Did you know your credit score and credit report are two different things?

6. Pay With Points

Remember those points you’ve been letting build up on your VISA rewards card? The holidays are a perfect time to cash some or all of those in to help pay for gifts, parties, and other seasonal expenses.

Depending on the type of rewards card you have, you may be able to redeem your points for statement credits or a check in the mail. Many cards also allow you to cash in points for various gift cards or use them for merchandise at retailers that partner with your credit card company.

7. Get an Interest-Free Card

If you anticipate using credit to pay for holiday travel and other big-ticket items, consider applying for a card with a promotional 0% financing period. You can use this type of card to charge your expenses with up to 12 months to repay the debt without interest.

Another option is to find a credit card that offers 0% APR on balance transfers, pay for your holiday expenses with a current card, and then move the charges to the new card. This will also allow you to pay down the debt over time without accruing interest, though you may be charged a balance transfer fee.

It’s fine if your holiday budget remains fluid as long as you stay within the overall limits.

8. Collect Coupons and Codes

From Halloween to New Year’s Eve, your physical and digital mailboxes will be filled with leaflets and emails from your favorite stores.

Instead of using the paper for kindling (or hitting Delete All on your Inbox), comb through the sales flyers for coupons and scan promotional emails for discount codes.

You can also sign up for online sales and discount codes from numerous internet aggregators and even find deals on local classified and neighborhood sites.

9. Give Your Time

The gift of your time during or after the holidays can be far more meaningful than any pair of jeans or flatscreen TV.

If you have family members you haven’t seen in a while, arrange to host them at your house for a weekend. Or create a coupon book filled with IOUs for cooking dinner, having a date night, giving a massage, and other personal pledges that your significant other can cash in during the year ahead.

You can build a nice nest egg by putting a few extra dollars in your regular savings each week.

10. Watch for Scams

December has become a popular (and profitable) time for scams. While it won’t keep you from busting your budget at Target or TJ Maxx, learning how to spot and avoid holiday scams can certainly have a positive impact on your bank account.

The simplest scam-dodging tips are often the most effective:

  • Verify the legitimacy of websites before providing financial or personal information.
  • Research companies advertising deals that seem too good to be true.
  • Ignore and delete emails or text messages from unknown senders.
  • Report suspected fraud to the Federal Trade Commission.

Since most scammers never take vacations, you should remain vigilant about preventing credit card fraud and reducing the likelihood of identity theft throughout the year.

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If someone steals your identity, you might not realize it at first.

The Takeaway

For many people, November and December have evolved into a months-long shopping spree. There’s nothing necessarily wrong with this annual rite, unless you get so wrapped up in giving and receiving that you ignore your economic realities. With a pinch of planning, a cup of creativity, and a dash of discipline, you can embrace the spirit of the holidays in a financially responsible way.

It’s a recipe for happiness that should prove popular this season and beyond.

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