How to Handle Holiday Spending

budget for holidays

By Zina Kumok, Financial Health Counselor, Credit Counselor

Online shopping can make the holidays easier, since you don’t have to drive to the mall, look for parking and then stand in line for hours. But it doesn’t take the sting out of swiping your card, hoping it doesn’t get declined and dreading the credit card debt that might follow.

But there are tips and strategies to save on holiday spending, even if it feels like you’re already destined to go over budget.

Check out these budgeting and money-saving tips to give yourself the best holiday gift, a balanced budget.

How a family can plan for holiday spending

According to a recent survey by Self and OnePoll, 59% of people were likely to overspend on gifts for their kids and 46% were likely to spend more on their partner. Parents came in third, at 45%.

But if you think you’re the only family member who wants to cut back on the cost of holidays, you’re probably wrong.

According to that same survey:

  • Almost 40% of respondents said they were extremely concerned about holiday spending this year.
  • 34% strongly agreed with the statement, “Holiday spending causes me stress.”
  • About 31% said holiday shopping has caused them to lose sleep.
  • 65% of respondents said they were likely to overspend on gifts.

Armed with this data, there are essentially two ways to plan for holiday spending:

  1. Anticipate where you’ll overspend and set a budget for it ahead of time
  2. Cut back on spending money for the holidays by cutting back on what you buy (and who you buy for).

The simplest way to save on holiday spending is to minimize gift giving.

It may seem Scrooge-like to not give gifts, but you wouldn’t be alone. About 10% of American families avoid exchanging gifts during the holidays. That means millions of people spend Christmas enjoying each other’s company instead of opening presents.

Many families decide to only give presents for children and not adults. Other families do a Secret Santa exchange and set a firm price limit, such as $25. This lets people still get a gift, but it’s less stressful than shopping for multiple people.

Talk to your relatives about how to eliminate or reduce gift giving.

How to make a holiday special on a budget

If your family is used to going all out for Christmas, it may come as a shock to drastically cut back. But there are ways to cut back while still keeping Christmas a memorable affair.

Sandy Smith of Yes, I Am Cheap doesn’t buy gifts for her parents or siblings. Instead, she takes everyone out to dinner, usually somewhere they’ve never been before. Because she has such a big family, it’s almost impossible to get everyone together for one occasion. For them, sharing a meal together is more special than buying individual gifts.

Not only does Smith spends less on dinner than she did on presents, but it’s much more personal and special than buying everyone stuff they might forget about. Plus, she doesn’t have to spend time running around buying gifts or going over budget.

2019 will be the 10th year that Smith has stopped giving physical gifts for Christmas, and she’s never regretted her decision.

Think about what your family can do together this Christmas. Can you provide one of the holiday meals? Can you take everyone out for ice skating? If you have a lot of kids in the family, you could pay for everyone to see “Frozen 2” or a Christmas classic like “It’s a Wonderful Life.”

Some cities have Christmas markets, full of artisans selling wares and homemade food. You could invite your family and pay for everyone’s admission, food and drink. Sipping hot cocoa while enjoying a whittling demonstration can be much more wholesome than spending hours at the mall.

How to budget for holiday spending

Here’s a simple step-by-step guide to help you with holiday budgeting.

1 - Make a list of your expected holiday expenses.

These should include gifts, travel costs, office gift exchanges, holiday parties and more. Look at your calendar and note all the holiday-related activities and what you might spend for each.

2 - Write out who you’re buying gifts for.

Start by writing down every person you’re thinking about buying gifts for this year. Consider people such as your:

  • Partner
  • Kids
  • Parents
  • In-laws
  • Coworkers
  • Boss
  • Neighbors
  • Nieces and nephews
  • Siblings
  • Extended family
  • Friends
  • Teachers
  • Custodians or service workers

If you like to tip service people, such as nail technicians or hairstylists, around the holidays, be sure to include that. Remember, $20 here and there adds up faster than you might realize.

3 - Decide how much you can actually afford to spend based on your budget and income.

If you’re like many Americans, you may discover you can’t afford to buy that many people that many presents without going over budget or in debt. If that’s you, it’s time to re-evaluate.

4 - Once you have that final number, see what cuts you can make.

Once you look at your list of people, and add up how much that could cost, it might help to cross off a few names, or reduce the amount you spend per person.

Consider making other cuts too, as needed. Can you skip eating out for the month of December and cook meals in instead? Can you avoid buying anything for yourself this holiday season? The Self survey found that 27% of people cut back on eating out and 25% cancelled subscription services to cover holiday costs.

If cutting back isn’t enough, try finding ways to increase your income.

The Self survey found that 33% of people said they worked extra shifts at work and about 30% said they found a part-time job or started a side hustle to afford the holidays.

5 - Try buying gifts in bulk.

To save money this holiday season, you should also get creative about where you shop for gifts. Instead of buying everyone singular gifts from the mall or online retailers, look at discount clubs like Costco.

“Buy a 3-pack of something like candles, for instance, and split them up amongst individuals,” Skirboll said.

6 - Track your spending

After establishing a budget, it's important to track how you spend money during the holiday season to make sure you stick to it, and adjust if needed.

How to save money during the holiday season

Once you have your budget, look for extra ways to save on holiday gifts. This is where online shopping usually provides more ways to save on Christmas gifts.

Try cash-back browser extensions like Rakuten, which provides a percentage cash-back when you shop at one of their retailers. Your credit card may also provide 1-3% cash back. Many stores also have discounts if you sign up for their email address, often between 10-20%.

Make sure to compare prices before you buy, even if you think you’re already getting a good deal.

If you’re shopping in person, look at competitors to see if they offer a better deal; many stores offer price-matching.

“More often than not, cashiers are trained to price match and offer you the lower price on the spot,” said Sara Skirboll, Shopping Expert at RetailMeNot. “A smile and a polite ask go a very long way!”

Just remember, saving money on purchases doesn’t help much if you spend several months paying down a credit card balance as a result. If you carry a balance, the initial discount is often offset by how much you pay in credit card interest over time.

If buying gifts for everyone isn't an option given your current financial situation, consider homemade gifts instead.

How to use a holiday savings account

While it may be too late to use this tactic this holiday season, it’s never too early to start thinking about next year.

A holiday savings account can be as simple as a savings account where you save money for Christmas gifts and holiday travel. Years ago, banks offered “Christmas clubs,” where customers could deposit money year-round and withdraw it during the holiday season.

Most banks don’t have Christmas clubs anymore, but consumers can set up their own holiday savings accounts. Create a new savings account, either at your everyday bank or an online bank with a high-yield interest rate, or take advantage of a category option within an existing savings account, if your bank offers one.

Sometimes referred to as “buckets,” these categories let you set aside funds for different types of expenses. So you could have your regular savings and your holiday savings within the same account.

Next, look at what you spent last year on the holidays. Divide that amount between 12 months and set up automatic transfers from your regular checking account to this savings account. Once December hits, you’ll have enough for all your holiday needs.

Make sure to adjust this figure if you’re going to be traveling more for Christmas or if you have more children to shop for. If your family decides to change their gift giving strategy, you may be able to lower this amount.

Planning ahead for Christmas can save you money, especially if you always put the balance on a credit card that takes months to pay off.

About the author

Zina Kumok is a Financial Health Counselor and Credit Counselor, certified by the National Association of Certified Credit Counselors, who writes extensively about personal finance.

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Written on December 10, 2019
Self is a venture-backed startup that helps people build credit and savings. Comments? Questions? Send us a note at

Disclaimer: Self is not providing financial advice. The content presented does not reflect the view of the Issuing Banks and is presented for general education and informational purposes only. Please consult with a qualified professional for financial advice.

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