Holiday budgeting: 15 tips to control your spending

Even Santa is hurting. 

Consumers are expected to spend between 3% and 4% more than last year this holiday season, according to the National Retail Federation, which comes after an increase of 5%, 13% and 9% each of the past three years. 

Fortunately, you don’t have to go into debt giving your family and friends all the gifts they want. Instead, take some time and tips to budget for the holidays and control your spending so it doesn’t control you.

Where to put your holiday savings

The first step is knowing where to put your cash, especially in this high-rate environment. 

One tried-and-true method is to set up automatic transfers from your paycheck into a high-yield savings account. This way you won’t forget to save, and if you give yourself enough time, you won’t feel the difference. 

Another trick involves taking advantage of when your paycheck hits your bank account. If you get paid every other week there will be two months a year where you get three paychecks, instead of two. Put one of these towards your holiday budget each year, which will give your savings effort a boost without cutting into your monthly budget. 

If you find yourself having trouble saving up as much as you want to spend, your savings goal is likely too high and you should lower your aim. 

Set your holiday budget

Waiting too long to set your budget could end up costing you in the long run. Mykail James, financial educator and founder of BoujieBudgets.com, says to think about your budget before you start buying things.

“There is never a bad time to start your holiday budget,” she said. “But if you start late, try creating boundaries and a list of what you will spend your money on this holiday season.”

Remember that your holiday budget is more than just buying gifts. Financial coach Laura Lonie says to think about everything that encompasses holiday shopping. 

“Other holiday-related expenses include holiday travel costs, outdoor and indoor decorations, holiday greeting cards and postage, gift wrapping supplies, shipping costs, holiday parties, special outfits, professional photos,” and so much more, she said. Make sure you include all relevant costs in your budget and change it every year as your needs change.

Stick to it

Crafting your budget to meet your needs and setting your expectations can help you keep a level head during the holidays. Lonie says a little bit of creativity goes a long way.

“Do a White Elephant gift exchange for adults or if you have any unused gift cards, use them to buy gifts or take someone out to eat as a gift using a restaurant card you already have,” Lonie said.

Set boundaries

You don’t need to buy every gift for every person on your list. The longer your list or the more expensive the item, the more likely you are to dig a deeper hole in debt.

Accredited Financial Counselor and Educator Melody Robinson Wright says you can use your current financial situation to set boundaries for holiday spending.

“Most people forget that there’s no requirement to spend money during the holidays,” she said. “Have conversations with loved ones about doing a scaled-down version of the holidays or let them know that you’ll be limited in what you can contribute or take part in due to other goals.”

Buy for the house — not individuals

While it’s nice to be recognized individually, sometimes it makes sense to give gifts for the household rather than to each person.

“Instead of buying gifts for each individual in a family, save money by purchasing a household gift that everyone can enjoy,” Wright said. 

Each household is different. For some, that could look like giving a gift card to see an upcoming movie or eat at their favorite restaurant. For others, that could be seeds for a garden or popcorn maker, Wright says.

Use cash

While you might not reap the rewards from using credit cards this holiday season, you’ll save yourself by skipping out on interest rates.

“By shopping with cash, you’re more likely to pause and think about your purchase before making it since the money is physically leaving your hand,” Wright said.

If you still want to use a credit card to get those rewards, do the math before checking out online or heading to the checkout line at the store. Then when the transaction posts, you can pay it in full. It’s more work on your end but lets you grab those credit card benefits.

Buy a group gift for friends

Aside from families, you can give a group gift to your friends, too. Think of your friends as a whole and what you like to do together. This could be seeing a show, going out to eat at one of your favorite restaurants or taking a staycation. 

There’s no wrong answer here because every friend group is different. But try to figure out what works best for your budget and your friends before buying the big gift.

Gift your talents

You don’t need to hit the stores and buy a physical present to give a meaningful gift. Chances are you offer more than you think.

“Are you constantly being asked to sing at an event?” Wright asked. “Do you love to make jewelry or share cuttings from your thriving plant collection? Instead of store-bought presents, save money by gifting the things you’re good at.”

Find the freebies

You can get into the holiday spirit without always spending money.

“Don’t be afraid to take advantage of all the free holiday cheer available,” Wright said. “[This includes going to look at] Christmas lights to local plays to office parties, and even donate your time to charity.”

Even if you’re planning on some shopping, look at the places that are offering freebies or discounts with your purchase. 

Meals and food are gifts, too

The holiday time is usually spent with those you love, so it’s natural to include food as a gift. 

Consider giving food, like prepared meals or baked goods, to friends and family members. If you’re hosting or attending parties, opt for potluck-style meals so the onus doesn’t fall on one person. Remember that time is also a gift, so sharing that time enjoying food with your loved ones counts.

Shop early (and regularly)

It’s never too early to start your holiday shopping. Financial coach Laura Lonie says you don’t have to wait to get into the holiday spirit with your budget.

“The best time to set a holiday budget is right after the last holiday ends,” she said. “If you celebrate Christmas, you can start a Christmas fund in January 2024.”

You can look for deals all throughout the year and if possible, keep those gifts stowed away until it’s time to wrap presents. 

Stick to the list

Your list is your guiding light. Make it early and tinker as needed, but try to stick to it as much as possible. 

“Make a list of who you want to buy gifts for and stick to it,” Wright said. “If you received a gift from someone that wasn’t on your list, don’t spend more than you planned trying to buy something for them too. You can send them a thank you note or do something kind for them in the future that doesn’t cost you money.”

Don’t get all the shiny new things

While new technology can feel like a great buy, remember that there will be a new one next year, and then the year after that. 

“Forgo the newest and latest and save money by purchasing electronics and other items from the previous year,” Wright said. “Many of the latest tech items only have a few new features, which make the previous models a great buy that will still last a long time.”

Try non-traditional stores

Literally think outside of the box — the big-box retailers, that is. Great deals are everywhere, including independent and small businesses around town. Also look at thrift stores, consignment shops, and even online stores like Etsy where people sell original work. 

Get crafty

If you have any crafting talents you can make some wonderful one of a kind gifts. Knitting, woodworking, painting or refinishing old furniture are skills that make great gifts.

Not crafty? That’s ok. Candle and soap making are both crafts that don’t take much artistic ability and make gifts that are well received. 

Frequently asked questions (FAQs)

How do I manage my finances during the holidays?

Starting early and finding out your needs is one of the best ways to manage your finances during the holidays. This gives you the time to meet your savings goals. 

Also, maintain discipline. There’s always going to be something else you want. But by sticking with your list, you’re less likely to overdo it.

What should I budget for the holidays?

The amount you budget for the holidays depends on your income, expenses and desires. This number is different for everyone. Figure out how much you can reasonably spend without going into debt and try to stay as close to that figure as possible.

How can I afford Christmas shopping on a tight budget?

You can still buy Christmas gifts on a tight budget. Shop the sales and get creative. It’s not about the amount of money you spend. Refurbishing a piece of furniture from Goodwill or putting together a scrapbook of a favorite memory can be great gifts that don’t cost a lot. 

You can also donate your time. Babysitting, pet sitting, or doing handyman tasks around the house may also be fantastic gifts that don’t cost a thing.