The holidays can be the most magical time of the year - and often the most expensive if you’re not careful. Holiday spending may be unavoidable, but it doesn’t have to break your budget or leave you with a mountain of debt. The key is to plan your spending before the holidays start. You’ll 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’ve put together some tips on how to tackle the holidays early and avoid holiday debt.
1. Create Your Budget
Establishing your budget first is the best way to set realistic expectations for holiday shopping. Make a list of what you need to buy or spend money on and figure out where you can cut back or what you can safely eliminate to keep yourself on track. One of the biggest spending categories is often gifts, but it isn’t the only category. You’ll want to account for holiday cards, travel, meals, décor, and other supplies.
2. Make a List, Check it Twice
Once you know what you need to spend money on, you’ll want to decide who you’ll buy gifts for. When it comes to family gifts, open the lines of communication and set clear expectations on gift-giving. This can include setting a limit on how much you’ll spend on each person or deciding to only buy gifts for those under 18.
Buying gifts for friends, coworkers, teachers, or neighbors is up to you. If your budget is tight, you may choose to skip gifts this year or opt for a “White Elephant” exchange instead. Some people choose to tip their housekeepers, nannies/babysitters, pet sitters, hairstylists, or door attendants. 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.
3. Focus on Meaningful Gifts
When giving gifts, remember that it’s the thought that counts. Homemade gifts are often more meaningful and can be more affordable than store-bought gifts. Here are some ideas for inexpensive, meaningful gifts to try:
A handmade knitted scarf or winter hat
Homemade spice blends or tea blends
A collection of family recipes
A custom photo calendar with family photos
Depending on your circle of family and friends, you may want to do away with gifts altogether and focus on spending time with each other. Plan a shared experience or make a group donation to charity. Some ideas to consider include:
Group game night. Everyone brings their favorite games to play.
Cookie and recipe swap. Ask everyone to make a batch of their favorite treats and share the recipe, too.
Holiday light display. Many towns have innovative holiday displays full of lights and other fun features that are family-friendly.
Potluck dinner. Gather everyone for a festive dinner and ask each guest to bring their favorite dish - and no “cheating” by bringing something store-bought!
4. Create a Timeline for Shopping
It can be helpful to begin making your holiday purchases before the traditional holiday shopping season starts. By starting early, there’s less pressure, and you may be able to find gifts that are typically sold out later in the season. Start by taking advantage of sales throughout the year instead of waiting for Black Friday or Cyber Monday. Depending on where you shop, you may find that the deals earlier in the year may be better than those available on holiday-related shopping days.
5. Explore Holiday Deals Wisely
It can be exciting to find a great deal on a gift, but be sure the sale you’re shopping for is really worth it. Retailers often make their deals seem greater than they are. 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.
Research the price of the items on your list before the holiday shopping season begins. That way, when sales pop up, you’ll know whether you’re getting a good deal or if you should keep looking elsewhere for a specific item.
6. Maximize Your Credit Card Rewards
Credit cards can be a smart way to get the most out of your holiday shopping if you stick to your budget. One way to take advantage of this is to use a rewards credit card. Find a credit card that offers rewards with every purchase that doesn’t expire and one that doesn’t limit the number of rewards you can earn, like our Founder’s Rewards Card, which offers 2%* or 1.5% cash rewards every time you use your card.
While store credit card offers can be tempting, it may not be the best idea to open multiple credit cards from multiple retailers. Stores will often offer an up-front discount for opening the card, but they don’t have the same perks as an all-purpose rewards credit card. Plus, the interest rate is typically much higher than that of a credit card you’d get from a credit union or other financial institution.
It’s possible to celebrate the holidays without ending up in debt. From setting up a savings share to building up your holiday funds over the year or choosing a credit card that offers cash rewards, we’ve got you covered. Check out our blog or WalletWorks page for more money management tips and tools.
*You can earn 1.5% cash rewards on purchases. You can earn 2% cash rewards on purchases if you maintain a PSECU checking account and qualifying monthly direct deposit(s) of at least $500. 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.