‘Tis the season to be jolly, but for many of us, current inflation rates are having a huge impact on holiday spending and gifting. We may call it the “most wonderful time of the year”, but with each passing season, our celebratory feasts, gifts, travel, and soirees get a little more expensive. In fact, according to the National Retail Federation, Americans collectively spent $936.6 billion last year on November and December holidays—that’s nearly double what was spent just 15 years ago ($501.5 billion in 2008). For the average American, that equates to almost $1,000 in expenses for the 2023 holiday season. Fortunately, it is possible to enjoy the merriment without going deeper into debt. How? By setting up a realistic holiday budget—and then, of course, sticking to your plans.
How to Build a Holiday Budget
Here are some tips to help you avoid being overwhelmed by post-holiday bills.
1. Review last year’s spending
The best way to predict what you’ll need for your holiday budget is to review your spending habits from previous holiday seasons. Pull up your bank and credit card statements and calculate how much you spent last year. Ask yourself if anything has changed since then—like job status, income, or household size. If you overspent in previous years, take that into consideration and adjust accordingly. Then, make a list of your expected expenses for this year and take care to note new expenses that weren’t included in previous holidays. Prioritize your nonnegotiable expenses and consider what you could eliminate to save money.
2. Set a spending limit
To avoid post-holiday stress, set a budget and stick to it. Take stock of your current finances and consider what you spent the previous year. Setting a budget in advance will help you be mindful of how much money you can devote to each category of expenses, including gifts, food, travel, entertainment, and other holiday cheer.
3. Decide how you will pay for everything
Once you’ve set your spending limit, decide how to cover your expenses. Will you use your credit card or pull from savings? Will you use your debit card or set aside cash? With a plan in place, you are less likely to overspend in one category, and you’ll be more mindful of unexpected expenses. If you choose to “buy now, pay later,” make sure you understand the terms and can pay back the balance on time.
4. Get a handle on existing debt
If you are already carrying some debt, adding to it—even just to get through the holidays—can be devastating to your financial well-being. Cut back on spending before you begin racking up new debts and, if you can, consolidate your high-interest debts into a single, low-APR loan or credit card.
5. Prioritize where your money is going
Before you dive deep into holiday spending, consider how to spend most efficiently. For example, if you have a Maps loan in good standing, you can free up some holiday cash by taking advantage of our Skip-a-Payment opportunity in November or December. This can be especially helpful for paying down high-interest debts or freeing up space on your credit cards. Of course, keep in mind that while you’re taking a break from your regular payment, interest will continue to accrue on your loan balance and your skipped payment will be added to the end of your term, extending your final loan payment date.
6. Be mindful of credit card spending
Credit cards are valuable tools for tackling holiday expenses, but they also make it easy to overspend. Map out how much debt you are already carrying and how much you can afford to pay once the hustle and bustle of the season has ended. Also, be aware of how your holiday spending might impact your total debt-to-credit (credit utilization) rate—which most lenders recommend you keep below 30 percent. Set a hard limit on the amount of credit you’ll use throughout the season and be vigilant about not spending more than you can realistically pay back.
7. Think priceless, not pricey
The best gifts aren’t always the most expensive gifts. In fact, a strict budget can be a blessing in disguise because it forces you to think about what is most important. Give the gift of your time and creativity. Make homemade gifts. Even if you aren’t particularly crafty, it is possible to give something special and meaningful without spending very much. Above all, be clear with your friends and family members about your budget. Careful planning and honest conversations can help reduce costs and keep the holiday season from ruining your finances.
8. Plan early for travel
If you are one of the millions of Americans who expect to travel this holiday season, pack your patience and plan ahead. Each year, over 55 million of us travel 50 miles or more away from our homes over the Thanksgiving holiday. Plus, nearly 115 million of us travel between December 23 and January 1. The cost of booking flights, rental cars, and lodging tends to surge as the end of the year approaches, so book early and watch for deals through credit card perks, AAA, or other such options.
9. Protect your personal data
Nothing will disrupt your holiday plans like cyber theft or credit card fraud. Fortunately, there are some simple steps you can take to protect yourself. Stay on the lookout for email, phishing, and in-store scams. Remember, fraudsters tend to take advantage of the busy season by luring people in with screaming deals, fake deliveries, and charity scams. Use your credit card (instead of your debit card) for online purchases and monitor your credit closely. Sign up for fraud alerts with your credit holders and consider putting a credit freeze in place. This will prevent thieves (and yourself) from opening new accounts in your name. When you are ready, you can unfreeze your credit in a matter of minutes.
10. Open a Dedicated Holiday Account
Lastly, if you frequently come up short of funds when the holiday season comes around, consider opening a dedicated account for your holiday spending. Our Christmas Club account, for example, is designed to help you save for holiday gifts, property taxes, insurance, and other year-end expenses. Just set up the account and add a direct deposit or choose an amount to transfer each month. You’ll earn interest on whatever you save, and the funds will be automatically distributed to an account of your choosing on November 1. Set yourself up for success by calculating what you spend each holiday season and then divide that number by 10. The new number is the amount you should set aside each month. Come November 2025, your holiday season will be fully funded, and you can savor the experience without feeling stretched thin.
Want more tips on holiday shopping?
- Check out our Kids and Teens Gift Guide, full of smart gifts that teach smart spending habits (coming soon).
- Find out whether it’s better to pay with your credit or debit card for those holiday gifts (coming soon).