Smart Holiday Spending: Budgeting, Saving and Smart Spending Tips

As the holiday season approaches, shoppers are facing a mix of optimism and challenges. Inflation remains a factor, but overall holiday spending is expected to increase. Americans are projected to spend an average of $925 on gifts and holiday-related expenses, totaling over $201 billion nationwide. Additionally, nearly half of consumers plan to travel, spending an average of $2,330 on flights and hotels, significantly contributing to the holiday budget. This marks a notable increase in spending compared to previous years

Despite the anticipated generosity, many shoppers feel the pressure. Over 55% of shoppers report stress about holiday costs, and some are considering dipping into emergency savings or even delaying bill payments to afford holiday expenses. Credit card debt remains a concern, with many still carrying balances from prior holiday seasons.

To avoid financial strain and debt, consider these strategies:

Set a Clear Holiday Budget

Before you begin your shopping, take time to establish a budget you can reasonably afford. Here’s how:

1. Subtract your essential expenses (housing, utilities, etc.) from your income to determine what you have available for holiday spending.
2. Define “your number” and make a detailed list.
3. Divide your list into categories, such as:

• Decorations
• Party supplies and food
• Holiday cards
• Gifts
• Travel expenses

Stick to Your Budget and Track Spending

Save your receipts and adjust your budget as needed. If you overspend in one category, reduce spending in another. If your budget doesn't cover won’t cover everything, consider alternatives:

• Secret Santa: A cost-saving option where group members gift just one person instead of everyone.
• Potluck Parties: Share the hosting responsibility by having guests bring a dish.

Earn Extra Holiday Cash with Seasonal Jobs

Seasonal employment opportunities can provide a financial boost during the holidays. Flexible schedules are typical, making it possible to take on a part-time job in the evenings or on weekends. Bonus tip: Positions at large retailers may offer employee discounts to further stretch your holiday budget.

Avoid Holiday Debt

Try to steer clear of taking on credit card debt to fund your holiday purchases. With interest rates often exceeding 20%, carrying a balance can set you back significantly and add debt. Additionally, be cautious of Buy Now, Pay Later (BNPL) services. While enticing with 0% interest offers, they can lead to missed payments if not carefully managed.

Save for Future Holidays

Start planning for next year by setting aside a small monthly amount in a dedicated savings account. For example, saving $83 monthly will give you $1,000 by the end of the year, reducing the holiday budget financial strain.

Work with a Professional

The process of examining income and expenses is an essential first step to managing your money – especially during the holiday season. Working with a CFP® professional can help you better budget your money by analyzing how you spend your income, debt and where you might be able to cut back. For more budgeting ideas and financial tips, check out LetsMakeAPlan.org.