The holidays can be the most magical time of the year, as well as the most expensive if you’re not careful. While holiday spending is often unavoidable, it doesn’t have to break your budget or leave you with a mountain of debt. Just follow our surefire action plan! That way, you know exactly how much you can afford to spend, who you’ll be buying gifts for, and where your money is going to go. We’ll help you prepare for the holidays now to avoid holiday debt later.
1. Establish Your Budget
To prepare 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 to keep yourself on track. Here are some ideas.
Make a List of Expected Holiday Expenses
Where will your money go this holiday season? Gift-giving tends to be one of the biggest spending categories, but it’s not the only one. Below are a few other common expenses you could run into during the season.
- Cards. Whether you distribute an annual newsletter to friends and family during the holidays or send purchased cards, you’ll have to budget for holiday cheer. You’ll need to include the costs to buy the cards or the printing (if you’re DIY-ing it) and postage in your budget. Don’t forget that some cards also require additional postage if they’re oversized or in an unusual shape.
- Wrapping paper. Depending on the size of your current wrapping paper stash, you might be able to use supplies left over from last year. But if you used up all your gift-wrapping supplies or want to freshen things up, you might need to buy a few more rolls, plus some tape, ribbon, gift bags, and tissue paper. Pro tip: after the holidays, shop for next year’s paper since it will be deeply discounted.
- Travel costs. Not everyone has travel costs associated with the holidays. But if your family is far-flung, travel can be a considerable annual expense. Travel costs to consider include transportation, baggage expenses, snacks and meals, and lodging.
- Holiday meals. If you’re hosting any holiday dinners, add up the time and money costs of buying, preparing, and serving food. You might want to research the difference between what you’d spend to make everything yourself and what you’d pay to hire a caterer or bakery to do some of the work for you. If you’re going to be enjoying any meals in restaurants, include those in this category, too.
- Gift exchanges. Gift exchanges and gift-giving might make up the bulk of your holiday budget. Depending on how many people you want to buy presents for and how much you plan on spending on each person, gifts can be a considerable expense. Set realistic budgets for gifting categories like family, office, friends, children, etc. Maybe you keep your budget for the office gift exchange low, giving yourself some wiggle room for family, for example.
- Hosting expenses. Expenses related to hosting a holiday party or meal go beyond the cost of food. You might want to buy some new decorations, new table linens or dishes, or even want to hire musicians or other entertainment for your gathering.
- Babysitting. If you have young children at home and plan on attending adult-only holiday parties, you’ll need to hire a babysitter to watch the kids and keep them safe.
- Host gifts. If you’re planning to attend a holiday gathering or meal at a friend's or family member’s home, don’t forget about the cost of bringing a small token of appreciation to the host.
Make a Gift-Giving List
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.
- Family members. It might be helpful to hold a family meeting and decide who to buy gifts for this year. For example, you and your adult siblings might agree to buy gifts only for those under 18. Or, you might decide to have each adult draw a name so that they can provide a gift for only one person.
- Friends. It’s up to you to decide whether you’ll buy gifts for friends or not, as well as which friends you’ll buy gifts for. You might want to discuss gift-giving with friends before you make your list. Some people might be happy to skip the gifts this year, or they might like to try something like a White Elephant gift exchange instead. Another alternative is planning a pay-your-own-way outing so that you have the joy of celebrating as a group doing something fun.
- Coworkers. You may want to buy gifts for the people who work for you, such as an assistant or intern. Whether you buy gifts for coworkers who have the same title is up to you. As with your friends, you might want to see if they’re set on exchanging gifts. They might be open to other ideas, such as choosing names from a hat and buying one gift or making a group donation to a charity.
- Neighbors. Whether you buy gifts for your neighbors or not depends on how well you know them. Don’t feel that you need to buy a present for someone you barely say hello to. If you’ve been to your neighbor’s house or they’ve been to yours, you might consider putting them on your gift list. Gifts for neighbors don’t have to be extravagant. They can be as simple as a card and homemade cookies or sweets.
- Teachers. If you have school-aged children in elementary school, the norm is to give their teachers a gift during the holidays. It’s less common for middle school and high school-aged kids to give their teachers gifts.
Make a List of Those Who Need Holiday Tipping
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:
- Housekeeper
- Nanny/babysitter
- Pet sitter
- Pet groomer
- Hairstylist/manicurist
- Landscaper/gardener/pool cleaning crew
- Doorman/building superintendent/elevator person
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 during 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.
2. Keep Your Budget in Check
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 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.
3. Start Saving Ahead of Time
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 account. To make the process of saving as easy as possible, you can schedule automatic deposits into the account each month.
Where to Get the Money to Save
While saving for the holidays in advance can help you avoid debt and 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:
- Restaurant meals. Instead, try bringing your lunch to work or eating one more home-prepared meal each week.
- Entertainment. Use a streaming service as an alternative to going to the movie theater or cut back on the number of streaming services you subscribe to.
- Personal shopping. Cut one or two “non-essential” purchases from your budget each month. Get a book from the library instead of buying one, for example.
Focus on Meaningful Gifts and Experiences
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 store-bought gifts.
If you’re stumped for homemade gift ideas, you can try the following:
- A fun (and easy) DIY mason jar holiday gift.
- A photo album or framed photo with a personalized note on the back.
- A collection of family recipes.
- A knitted scarf or pair of mittens.
- A homemade coupon book full of IOUs, favors, or the promise of spending quality time together.
- Homemade cookies, brownies, and other baked goods.
- Homemade tea blends using dried herbs (such as a relaxing tea with mint and chamomile).
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:
- Group game night. Ask your friends to bring their favorite game to play with everyone.
- Potluck dinner. Ask everyone to bring a dish to share. Make sure they bring something they made — no “cheating” by bringing something store-bought!
- Cookie and recipe swap. Ask everyone to make a batch of cookies and bring them, plus copies of the recipe, to share and swap with others.
- Book exchange or book club. Either pick a book to read and discuss together or invite people to bring one of their favorites to swap with others.
- Movie night. Have everyone vote on what movie to watch in advance.
4. Create a Timeline for Holiday Shopping
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 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.
- Presidents’ Day
- Memorial Day
- Independence Day
- Amazon Prime Day
- Labor Day
- Columbus Day
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 buying from:
- Black Friday. You’ll find sales at major retailers and online the day after Thanksgiving.
- Small Business Saturday. Local retailers and small businesses typically offer deals the Saturday after Thanksgiving.
- Cyber Monday. Both retailers with brick-and-mortar locations and online-only stores tend to offer discounts on the Monday after Thanksgiving.
5. Do the Math on Holiday Deals
Is that Black Friday bargain really a bargain? Taking advantage of 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.
Avoid the Trap of Free Shipping
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.
Be Cautious of Upsells
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 must pay for. Read the fine print to make sure you aren’t paying extra for:
- Extended warranties
- A subscription service you don’t want
- Concierge service
If you see any “extras” added to the price of the item, ask the retailer to remove them before you finalize the purchase.
6. Make the Most of Your Credit Cards
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, and they’re not all the same. Look for a rewards card that offers the following.
- Rewards with every purchase you make (no need to worry if your purchase is in the right category)
- Rewards that don’t expire
- No limits or caps on the number of rewards you can earn
As you gear up for holiday spending, you might be wondering if it’s a good idea to get a store credit card from the 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.
7. Be Mindful of Your Spending
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.
- Shop with a list. Always have your holiday gift-giving and prep lists on you. That way, you’ll always know what you need to buy.
- Don’t shop when you’re hungry or stressed. You’re more likely to make impulse purchases if you shop on an empty stomach. The same is true if you shop when you’ve got a lot on your mind.
- Remember, it’s not a deal if it’s not within your budget. You’re not saving money if you buy something because it’s on sale if that item wasn’t already on your list. Say no to things you didn’t plan to buy before finding out they were on sale.
- Keep your receipts. If you do give in to an impulse (it happens to everyone), hang on to the receipt. You can usually return the item later. It’s also a good idea to keep receipts for gifts you buy and request gift receipts in case an item is a duplicate or the recipient doesn’t like it. Having the receipt also allows you to dispute any inaccurate charges that turn up.
- Don’t forget your regular expenses. Although it’s fine to cut out non-necessities from your budget to make room for holiday purchases, don’t cut out the things you need for the sake of gift-giving. Pay for essentials first, then look at what’s left over when planning your holiday budget.
- Use cash or debit cards. Although using a cash rewards credit card lets you earn an incentive, if you have a high balance or have struggled with credit card debt in the past, it might make more sense to limit yourself to using cash or a debit card so that you’re not tempted to run up another high balance. Our debit card offers rewards, as well, so you don’t have to miss out on rewards if you’re not comfortable using your credit card for holiday expenses.
Get Ready for the Holidays With PSECU
It’s possible to celebrate the holidays without ending up in debt. Whether you’re interested in opening a savings account to help you build your holiday nest egg over the year or using 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.
*Some exclusions may apply. See the Visa® Founder's Card and Visa® Alumni Rewards Card Rewards Program Terms and Conditions for full details.
The content provided in this publication is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Some products not offered by PSECU. PSECU does not endorse any third parties, including, but not limited to, referenced individuals, companies, organizations, products, blogs, or websites. PSECU does not warrant any advice provided by third parties. PSECU does not guarantee the accuracy or completeness of the information provided by third parties. PSECU recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.