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Avoid Blowing Through Your Holiday Shopping Budget

Written by
Ashley Altus, CFC
Ashley Altus is a personal finance writer who covered financial planning with a focus on money management and household finance for OppU. She is a Certified Financial Counselor through the National Association of Credit Counselors. Her work has appeared with O, the Oprah Magazine; Cosmopolitan Magazine; The Smart Wallet; and Float.Today.
Read time: 5 min
Updated on November 30, 2022
Buying Christmas gifts for your loved ones is one way to show them you care, but don’t let overspending drag you down this holiday season.

Without a holiday spending plan for December’s festivities, expenses can add up quickly.

If you’re on a tight budget, it may be time to reevaluate your gift-giving strategy and have difficult and frank conversations with those closest to you.

We get it: Money conversations with family can be awkward and difficult, depending on your relationship with them. It’s also a traditional part of gift-giving to not reveal the amount you spent on the gift, which can make these conversations even harder.

“People love you whether you give them gifts or not,” says Jay Zagorsky, Ph.D., economist and senior lecturer at Boston University’s Questrom School of Business. “It’s time to cut back and tell the people in your lives that you love them in some other way.”

Holiday budgeting tips

Creating a holiday budget and using your creativity when it comes to gift-giving can help you stay within your means, avoid taking on holiday credit card debt, and strengthen your relationships with loved ones. It’s also a good exercise in budgeting your money for the next year, too.

Here are three budgeting tips that can help keep your Christmas spending under control.

No. 1: Make a shopping list; check it twice

While gifts are a dominant factor in holiday spending, they’re not the only expense to think about when it comes to making your holiday or Christmas budget. You’ll also want to factor in a Christmas tree, decorations, food, travel, and any gathering-related expenses. This is on top of regular monthly expenses — like rent, utilities, and food — which should take priority in your budget, even during the holiday season. It’s not worth overspending and falling behind on your fixed expenses in exchange for Christmas gifts.

Once you’ve made your gift list and written out every purchase you plan to make, identify and separate your wants from your needs, says Lauren Weatherford, a community development extension agent for Fayette and Nicholas Counties at West Virginia University. Treat your Christmas budget like a personal finance exercise:

Create a specific gift budget. Assign dollar amounts to each Christmas gift. Maybe you plan on spending $50 per gift per immediate family member and $20 per gift on extended family.

You can also assign a dollar range for each expected expense in your total budget to give yourself some cushion.

“The exact dollar amount can be hard to forecast, so this creates a little bit of flexibility in your budget and you won’t feel like you failed if you go over,” says financial therapist Ed Coambs.

No. 2: Avoid the last-minute holiday craze

After you’ve ironed out your budget, pinpoint which stores carry the products you plan to buy and shop the holiday sales to help you save money.

The sooner you buy your Christmas gifts and holiday paraphernalia, the better. Super Saturday — aka the Saturday before Christmas — ­is the biggest shopping day of the year. According to a 2020 report from the National Retail Federation, 54% of buyers will purchase last-minute gifts the week before Christmas.

“The Saturday before Christmas, you’re less likely to stick to your budget because you’re panicking trying to get all your gifts on time,” Weatherford says. “Utilize those sales and do your research to find the best price.”

Supply chain shortages due to the pandemic may also make it more challenging to find gifts on your list, especially this time of year when so many people are shopping at the same time.

No. 3: Strive for cash-only

If you prefer to complete your holiday shopping in person, pay with cash. Once you’ve spent all your cash, you’re done Christmas shopping.

Buying gifts with cash saves you from using a credit card, which research has shown can lead to overspending. Using cash can also help to avoid a credit card debt hangover once the Christmas season is long gone.

However, as more shopping moves from in-store to online shopping, it forces consumers to pay with debit and credit cards instead of cash. In these instances, remain diligent.

“When you make a transaction online, make sure you’re only shopping for that gift,” Weatherford says. “It’s so easy to just put one more thing in the cart.”

To help stick to your holiday budget online, Zagorsky recommends buying a virtual gift card at the store where you plan on shopping to replicate the cash experience you would have at a physical retailer. When the gift card hits zero, don’t reach for your wallet again.

3 ways to save on holiday gifts

No. 1: Avoid expensive gift wrapping

Unwrapping Christmas presents is fun, but experiences can be more valuable and create more memorable moments and closer bonds with your loved ones. It can also help you save on wrapping paper.

Unless your gift was very large or unique, chances are you don’t remember the gifts you received last holiday season, Coambs says.

If your bank account has constraints this year, think about gifting a shared experience, such as a weekend at a national park or a trip to the zoo, which can build your relationship with a loved one better than a physical gift while costing less money.

“You can’t buy interpersonal relationships on the shelf, no matter how good your gift is,” Coambs says.

No. 2: Find new holiday traditions or resurrect old ones

Ask your grandparents and older relatives about the holiday traditions they grew up with. Repeat them or update them so they would work today.

Suggesting Christmas spending limits, a white elephant gift exchange, or Secret Santa can be a way to introduce new holiday traditions and avoid making someone feel shame because they don’t have enough money for Christmas gifts this year.

No. 3: Get crafty

When it comes to homemade gifts, baked goods often come to mind first, but you don’t need to limit yourself if you’re not Martha Stewart in the kitchen.

From making your own bath products or home décor, there are countless DIY ideas for creative gift-giving that won’t break the bank.

“Don’t underestimate the value of creative gifts,” Weatherford says. “They really do have a lot of value for your loved ones,”

Other gift ideas for your loved ones can include passed-down family heirlooms, family photographs, Christmas cards, or regifting items you think they would appreciate.

Stick to your plan

If you tend to go all out for holiday gifts, it can be hard to switch gears, as some people may have grown accustomed to a certain standard and reflect on the materialistic instead of the relational value of your relationships.

So when creating your holiday spending plan, think of what is truly important to you this holiday season so you can save money. A debt-free Christmas is possible. Focus on shared experiences to further bond with your loved ones instead of the perfect gift.

Article contributors
Ed Coambs

Ed Coambs, MBA, MA, CFP, CFT-I™, LMFT, focuses on improving couples' relationships with money. He is a financial therapist based in Charlotte, NC. Follow Coambs on Instagram @healthyloveandmoney.

Lauren Weatherford

Lauren Weatherford has been a community development extension agent for Fayette and Nicholas Counties at West Virginia University for nearly 20 years. She has a master’s in public administration and has worked in community development and education locally and internationally. Through her partnerships, she has been able to help communities improve their quality of life through financial literacy.

Jay Zagorsky

Jay Zagorsky is an economist who has taught at Boston University’s Questrom School of Business for more than two decades. Zagorsky is a prolific writer and has published two textbooks, numerous research articles, and over 100 articles for the general public in places like Salon, FastCompany, Quartz, and The Wall Street Journal. Much of his research is focused on understanding the causes and consequences of poverty and wealth.

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