Holiday expenses are expected to reach an all-time record this year, according to a survey conducted by the National Retail Federation. The average per person spend on for gifts, food, decorations and other seasonal items is projected to be $902, up $25 per person. Add inflation and the higher cost of items and you can easily see how the holiday season can become a real financial stressor for many people.
Luckily, this doesn’t need to be the case. Try following these tips to navigate holiday expenses without overspending.
1. Set a Budget
Discretionary spending is the amount you spend on non-necessary items, including holiday items. If you don’t have a budget already, you should consider creating one to make sure that you steer clear of unnecessary expenses.
Many people find it helpful to break down their budget into categories to stay on track. Examples of useful categories include, gifts, food and drink, parties, and travel, but you may have others.
You may find a notebook is all you need to track what you spend. However, a budgeting app is often a better choice. Many are free and they simplify the process by offering categories, spending limits, connections to accounts, and automated updates of your spending. Basically, you can see where your budget stands in real-time.
Sure, it takes some time to set up a budget, but it’s worth it. You’ll avoid overspending surprises and unnecessary fees and interest.
2. Establish a Holiday Savings Account
It may be a little late for this season, but it is a great time to start saving for next year. Set aside a fixed amount every month throughout the year and don’t access the money until the holiday season.
One of the easiest way to ensure that you do this is through an automatic savings plan. Most banks and credit unions allow you to schedule recurring transfers and the process is totally customizable and free. You choose the date and the amount of each transfer and since you don’t see the money, you’re less likely to spend it.
If keeping your fingers out of the pot seems impossible to you, consider using a Certificate of Deposit (CD). This locks your money in for a certain length of time, you earn more interest, and you can’t cash the CD in early, even if you have the urge to spend.
3. Pay with Debit Card or Cash
Reaching for your credit card is very tempting during the holiday season. That’s not surprising, since it’s easy, fast, and you don’t have to think about how much you’re spending. Still, that makes it very easy to accumulate debt.
Most people don’t realize just how expensive credit cards can be either. Interest compounds on the balance, making it different and more expensive than most other forms of credit.
For instance, most loans use simple interest which does not build on the outstanding balance. Instead, interest owed is divided between your payments. Every payment pays a portion towards the principal and interest.
A great way to avoid interest all together is to only spend what’s available to you now. Either take cash out of the ATM or use your debit card to buy from your bank accounts. When your money is gone, it’s time to stop spending.
4. Avoid Buy-Now-Pay-Later
Buy-now-pay-later may seem a great option, but beware. If it seems too good to be true, it probably is.
So, what’s the problem with this option? After all, retailers and credit cards claim it is interest-free. However, that isn’t necessarily true. According to Consumer Reports, BNPLs can have APRs as high as 36.99% if they are over the long-term.
Regrettably, many people don’t repay their loan within a few months, so they end up paying much more than almost any other credit option available to them.
5. Have Realistic Expectations
Everything costs more, yet what you earn seldom goes up. Consequently, you may have to lower your expectations when it comes to holiday spending this year.
Perhaps you need to buy fewer gifts. Maybe you should attend or throw fewer parties. Finally, you may need to face the fact that you simply can’t afford a trip this year, since travel costs have skyrocketed.
Of course, this doesn’t mean that your holiday season will be a bust. Prioritize what is important to you and then spend less on other items. There’s always alternative ways to lower your spend if you put your mind to it.
6. Handcraft Items
Just because you’ve always done things a certain way, it doesn’t mean that you can’t switch things up. You can think outside the box and add fun and personality to your holiday season this year.
Instead of store bought gifts, consider handcrafting items. Bake, sew, build, paint, draw, or collect items for a cost-effective personal gift. Your thoughtfulness will show through and you’ll avoid hefty gift price tags.
7. Exchange Names
Choosing a single name for gift buying makes a lot of sense. It lowers your spend and you can tailor whatever you buy to the person too.
The best thing about this approach is that you can buy the person something they really want or need. After all, does Uncle Bob really need another tie or does mom need another apron or box of chocolates?
8. Reuse and Recycle
If you or your gift recipient are fans of reusing and recycling, repurposing second-hand items is often a great choice. Thrift stores, consignment shops, and online marketplaces often offer new or almost new items at a fraction of the cost of what you’d pay retail.
Pair whatever you buy with extras and you’ve got a one-of-a-kind gift. Examples include filling a thrifted glass container with chocolates or candy or pairing a bottle of wine with second-hand elegant glasses.
9. Factor in Additional Expenses
The holidays often involve expenses that we forget about. For instance, your kids may need small gifts for their teachers. Maybe you need a new dress for the office party, since your old one no longer fits.
Wrapping paper, bows, a visit to the hair salon, or bottles of bubbly all add up. Just make sure you include them in your budget so you can enjoy a happy holiday season, without financial stress.
10. Use Your Emergency Fund When Necessary
An emergency fund is a valuable tool you can use if you suddenly face unexpected holiday expenses. If you don’t have one, avoid high interest payday loans and credit card advances. Instead, consider holiday loans. If you earn a steady income, they should provide a lower interest rate and fixed payments to ensure you’ll pay off your debt.
11. Track Your Spending
It’s one thing to set a budget, but it is totally another to actually track what you spend. Luckily, if you do follow our suggestions it isn’t that hard.
First, definitely consider a budgeting app. They automate the process so you can immediately see if you’re approaching or overspent on a particular holiday category.
Second, use your online banking platform to keep tabs on how much cash you’re spending. When your account is low, curb your shopping.
Finally, don’t use credit cards or buy-now-pay-later plans. If you have the money to buy, go ahead. If you have to pay later, try to avoid it.
12. Establish Good Year-Round Spending Habits
The holiday season tends to highlight financial issues. If you feel you’re already in a financial bind and you haven’t even started your holiday shopping, it’s time to review your spending habits.
Do you need to stop eating out or ordering in all the time? Do you spend a bundle on streaming services and memberships? Are you a fashionista that can’t stop buying shoes, bags, or outfits?
Controlling your spending is a year-round thing. Luckily, when you develop good money habits the holidays become less daunting. You’ll learn how to combat overspending and improve your overall financial well-being. Controlling your spending also helps you build good credit scores.
13. Consider a Holiday Loan
If you do rack up holiday expenses on credit cards or buy-now-pay-later plans that you can’t pay immediately, consider moving these debts into an online holiday loan.
Holiday personal loans offer a set interest rate and fixed payment amount so you can work it into your budget. You’ll also have a clear timeline for repaying what you owe. As a bonus, you can also consolidate your existing debt to clean the slate and get your finances back on track.
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Our extensive network of reputable lenders in a one-stop location allows you to compare interest rates and terms within minutes. Complete one application form in under 15 minutes and you’re good to go. Pre-approval does not affect your credit scores either.
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