
The holidays are here, and you may have a lot of expenses coming up. There are so many fun things to spend money on during the holiday season.
The holiday season already started with Halloween festivities and shopping for home decorations, costume parties and bags of candies. But the big money spending holidays like Thanksgiving and Christmas are coming close.
According to the statistics, despite the covid-19 economic toll, consumers are still spending above the five -year average on gifts. In 2019 the average American spent around $900 per person on holiday gifts.
And according to a survey, American consumers took on an average $1,325 worth of holiday debt in 2019. That is a lot of debt to take on for holiday spending.
And, this doesn’t include other holiday spending such as food, decorations, and activities. There are also other expenses many people forget to budget for, like stamps, cards, shipping, etc.
If you don’t want to accumulate new debt during the holidays, you need to allocate some money for decorations, gifts, parties, and maybe travels. The best way to do that is to make a holiday budget and then stick to it.
In this post I want to share the smart ways to create a holiday budget, save money on holiday shopping and avoid getting into debt:
1. Set a holiday budget and know your limits
If you don’t want to accumulate new debt during the holidays, you need to make a holiday budget. Before you decide what you should spend money on, you need to figure out how much money you can spend. The smart way to prepare for holiday spending is to look at your basic budget spreadsheet.
First, look at your monthly take-home pay and then subtract your monthly expenses, and calculate what is left. The number on your spreadsheet or calculator is how much you can afford to spend for the holiday season without getting into new debt.
Now you know how much you can comfortably spend on things like clothes, gifts, parties or travels. Don’t forget to add all your other holiday expenses like:
- Decorations
- Food
- Postage and shipping
- Charitable donations
- End of year tipping
Related post: 7 Easy Steps to Help You Set Up a Budget
2. Make a list of people

After setting up a budget for your holiday spending, the next step is to make a list of your friends, family members, co-workers, neighbors and assign a gift budget to each name. In addition to that, you can put on your list a few gift ideas for each person within your budget. Keep the assigned dollar amount within your budget. But leave a little extra wiggle room if numbers are not working.
You can use an Excel spreadsheet or a small notebook for a detailed list of your holiday spending, including names, gift ideas, the amount of money you can spend and even the ideas where to find the gift. Once you have these estimates and brainstormed the gift ideas it will be easier to see your limits and not deplete your wallet during the holiday season.
3. Do your research and find the best deals
One of the keys to smart holiday shopping is research. Doing research on the best deals is important. We are bombarded with sales promotions, special purchases, buy-one-get-one-free deals and more. You want to know when and where the best deals will be offered.
During the holiday season, retail stores are offering great deals. Before making any purchases, check prices at multiple stores. To save money, search and compare prices online before setting foot in a store. When you come shopping in a retail store, use your research information and take advantage of the deal if you see one.
Many people prefer to shop online these days and that number grows with every year. So, if you want to skip the store and shop online check out a few deal-oriented websites:
Hot Lowest Price Deals w/ Free Shipping
The benefits of shopping online are not limited to saving on gas and parking fees. Let’s face it: very few of us enjoy holiday shopping. Sometimes it’s very hard to find pleasure in heading out to find gifts for our loved ones and dealing with crowded malls, long lines, and pushy shoppers. I found it easier to shop online in the comfort of my home day or night. And don’t forget to look for free shipping offers, if you plan to order online.
If you travel, many online websites offer great gift selection, and your items can be sent to your travel destination. That means you won’t have to worry about traveling with bulky presents.
4. Start shopping

You set up a holiday budget, you made a list and have done your research. Now it’s time to start shopping with your list in hand. It’s a good idea to start shopping early so you can get the best prices. If you do last- minute holiday shopping, very often you will risk paying much higher prices.
Make sure that you keep a track of your spending and stay within your budget. Use the same excel spreadsheet or a notebook with names, gifts and price ideas for tracking.
I would recommend adding a column to your spreadsheet and name it “planned spending” and “actual spending.” Total up “planned spending” to see how much you can afford to spend over the holidays. Then keep adding the cost of gifts to your “actual spending” column. This way you will keep track of your spending. You should cut back or limit gift items when you see spending more and getting out of your budget limit.
Another smart way to save money during the holiday season is to search your home for the ribbons, wrapping paper, holiday cards, decorations or even gifts you bought on sale last year.
You may even find the gifts if you bought them after the holidays, stashed away and forgot to retrieve. It happened to me several years ago, when I found a few gifts and left it forgotten in a storage closet. After that, I have bought a big plastic bin where I keep all holiday decorations and last year’s gifts and created a designated space for holiday items, so I don’t lose track of them again.
5. Cash or credit cards
Recently I have read that “cash makes it easier to stick to your budget”. The idea behind that statement was to label envelopes with the name of the gift recipients and other spending categories. Then put the cash in each envelope, matching the amount with your planned budget.
This method sounds like an old fashioned to me, but it will be practical for anyone with careless shopping habits. With only limited cash available and no credit card to use, you cannot get out of hand with your spending. It’s easier to stick to your budget by paying cash.
So, pay cash if you want to avoid overspending. But I must admit that I never shop with cash and prefer to use credit cards. However, Roman and I are responsible credit card users. We always pay off our balance in full to avoid getting charged high interest. Besides, most of our credit cards offer cash-back rewards, so I feel that I still make money while shopping.
If you are planning to use credit cards, it’s recommended to shop with no more than 2 credit cards. You will be better off with low-interest credit cards, not the expensive department store cards. The more cards you use, the harder it is to keep a track of your spending.
6. Alternative gifts

The winter holidays are the most expensive time of the year for many people. On average the shoppers will spend around 730 billion of hard-earned money between November and December.
What to do if you want to enjoy your holiday season without overspending or getting into new credit card debt?
What other options if you don’t have enough savings or extra cash available to cover your holiday expenses?
There some ideas of alternative gifts that will come handy. Instead of buying individual gifts, set up a Yankee Gift Swap or Secret Santa. Gift swaps and exchanges at holiday parties help to trim down the cost of holiday spending for every guest.
Other ideas – potluck dinner with friends and handmade gifts. Homemade or handmade gifts are great for any occasion. I have a friend who gives us beautifully decorated glass jars with homemade cookies for Christmas and New Year. She has a big box of saved holiday decorations and likes to make and decorate her gifts for each occasion.
Or you can give actions instead of physical gifts by babysitting for a stressed mom, cooking dinner with a friend, baking fresh out of the oven cookies with your kids or grandkids or simply buying and decorating a Christmas tree together with your family.
After all most of us cannot remember the gifts we received last year or year before. But we all have sweet memories of family’s favorite holiday traditions.
100 Free Gift Ideas Your Friends Will Actually Want to Receive by Nicole Dieker
Final Thoughts
The holiday season is here. It feels that holiday shopping starts earlier every year. Retail stores have barely put away their Halloween decorations before they fill the shelves with Christmas gifts. Festive holiday ads on TV, brightly decorated streets and shops would make you believe that this season is the best time for shopping. It’s easy to get overboard on holiday spending unless you know your limits.
Now is the best time to put your holiday budget together, make a list of gifts, check the prices and start shopping.
Have you planned out your holiday budget? Share in comments your ways to save money on holiday shopping.
I love the potluck and handmade gifts ideas. That sounds like a great way to save money. We stopped giving gifts to most of our siblings a few years ago. And now we just do gifts for our kids and grandkids. I think the most important part of avoiding holiday debt is having a plan or list when you shop. Especially since around the holidays and especially on Black Friday there is so much temptation to impulse buy.
I am glad you found this post helpful and thank you for sharing your thoughts!
Great tips! I am usually good about sticking to my budget and have never gone into debt over the holidays, but I can see how easily that can happen. When you have young grand kids you don’t want them to be disappointed on Christmas morning.
I think we all learn from our own experience that holiday shopping without a good plan ends up costing way too much. We used to go into Christmas holidays with no plan except for to spend money. Now we carefully budget our holiday spending every year and try to stick to it. Thanks for sharing your thoughts Roy!