Holiday spending in 2020 reached a record high of $789.4 billion, driven by a nearly 24% increase in online sales. Where does that money come from?
Unfortunately, most people haven’t saved a penny for gifts. Depending on the current state of your financial planning, this could set you up for a holiday spending hangover.
Even if you’re just now realizing that your holiday expenses put you in a financial bind, it’s not too late to protect yourself from some scary credit card bills. Here are a few holiday spending tips to ensure you start out the New Year right.
1. Determine your budget
A holiday spending money guide doesn’t have to be a buzzkill; the bill in January, that’s a buzzkill. Take an honest look at your finances and determine how much you can spend on gifts and decorations this year. To manage your money, you may need to get creative about raising funds and gift-giving. Could you cut out some “extras” to make more room in your budget, like giving up a subscription service or cutting back on eating out temporarily?
Rather than emptying your savings account, consider taking a second job or working overtime over the holidays. Toy and game stores increase their staff by as much as 38% around the holidays, and there are more co-workers looking for someone to cover a shift or project for them.
It’s also fine to use a credit card during this time of year, if you’re smart about it. Now is the time to put those credit card points to work, helping to expense your travel or even give you cash back. After all, that bonus was why you signed up anyways, right? Just keep in mind the most important holiday spending tip: pay your balance in full when the bill rolls around.
2. Make a list – and check it twice
It’s understandable that you want to buy a gift for every family member and friend, especially if you have a lot of nieces and nephews. But if you have a large family, this can add up fast. It’s best for your holiday spending budget to limit your spending to your immediate family and only a few other loved ones.
You don’t have to label people as “naughty” and “nice,” but it is essential to create and stick to a list. Do you really need to get Bob in accounting a present? Maybe Bob would enjoy your grandma’s secret-recipe Christmas cookies or homemade sugar scrub instead of the fifteenth bobblehead for his desk.
Even extended family members don’t necessarily need a physical gift. Giving your time and love can be more than enough.
If you have children, this season can be an excellent opportunity to raise a fiscal family by sharing some holiday spending tips with them. They can help you make your list – and will likely have some very creative ideas for gifts as well.
3. Be generous in spirit, not holiday spending
All of your loved ones deserve a gift this holiday season – a holiday spending money guide isn’t about being stingy. It’s about prioritizing your holiday spending. It’s better to give a thoughtful gift within your means, and seek to bless them, than to have a relationship in which you keep score. The holidays are about embracing the gifts of life – connection, joy, gratitude and more – not about material gifts. Your friends and family often prefer the gift of an experience with you instead.
Give your time to help your great aunt clean her house or make small repairs. Offer to watch your nieces and nephews for a night for free. Get together with grandma and let her show you how to make her favorite recipes. For acquaintances and coworkers, bake a large batch of cookies and bring them in for everyone to enjoy.
If you are really set on getting someone on your list a gift outside your means because you know how much they’ll love it, see if there are one or two other people who would want to go in on the gift with you. Group gifts from siblings and coworkers can be especially meaningful.
4. Be mindful of “small” holiday expenses
Don’t give into the indulge-a-little mindset that is so easy to fall into this time of year. So often we waste money in areas that don’t give us as much enjoyment as we initially think. The extra latte here or extra sweater there, all in the spur of the moment, does add up. Keep both the extra pounds and the extra bills at bay by reminding yourself of your goals. You’ll be thanking yourself that you don’t have to work extra hard in the new year to make up for those things that didn’t even bring you much satisfaction now.
In fact, holiday spending tips aren’t just for the holiday season. Changing your mindset to focus on your long-term goals rather than short-term gratification is essential not only to saving money this holiday season, but also to save for retirement and achieve total financial freedom in the future.
5. Keep emotional holiday expenses in check
It is so easy to get caught up in the trap of “keeping up with the Joneses” and spending more than we should on extravagant gifts or having the best-decorated house on the block. Take a few minutes – or even a few days – before you buy to check-in with yourself emotionally and make sure that your fulfillment levels on a purchase match the price you are paying for it.
If there is someone in your life who always gives you extravagant gifts, accept them in the spirit of generosity in which they were given, but don’t feel an obligation to reciprocate with a gift of equal value. You don’t need to out-buy everyone in your life. In fact, if exorbitant purchases lead to a begrudging attitude toward your friends and family once the bill comes, it will only harm your relationship.
6. Become an expert deal-finder
In 2020, Cyber Monday sales alone hit $10.8 billion. What these shoppers may not know is that Black Friday and Cyber Monday are not always the best time for deals. A NerdWallet study found that most retailers repeat the same deals as the previous year on at least some products, and that major retailers offer even better deals earlier in November, before Black Friday and Cyber Monday.
Adobe Analytics data backs this up, showing that many deals hit their peak before or on Thanksgiving. Online shopping offers better bargains than in-store, but it also depends on what you’re buying. Cyber Monday may be a good time for deals on electronics, but not for sporting goods or toys.
There is one thing nearly every shopper can agree on: one of the top holiday spending tips is to shop after the holidays to take advantage of sales. Don’t limit yourself to gifts. You can also take advantage of the after-Christmas sales to stock up on wrapping paper, decorations and cards for next year when they are at their deepest discounts.
7. Plan ahead for next year
Ultimately, smart holiday spending tips involve being prepared. If you didn’t have enough time this year, make the most of the pain you’re feeling now over your lack of financial planning and start planning ahead for next year. Earmark a small amount in your spending plan each month for next year’s holidays, and by the time you get there, you’ll have a cache waiting for you. If you are so blessed as to receive a holiday bonus, set aside a percentage to help you cover next year’s costs and then invest the rest to help you reach those financial goals faster.
Spend cash instead of using cards when possible to help you keep track of how much of that budget you’ve spent – and to really feel how much the purchase costs. If you do pay with a credit card or use installment payments, read the fine print and always pay off your balance as soon as possible. Making only minimum payments will drive up the total amount you pay over time.
To curb holiday expenses and get the best bang for your buck, monitor deals at your preferred stores year-round. Start looking for gifts for those on your list throughout the year. Having half your list taken care of before Black Friday rolls around next year will minimize financial strain and last minute gift-finding stress. Just make sure you keep track of your list and remember where you hid the gifts!