There is no more crucial time for budgeting than during the holidays. A proper budget lets you spread holiday cheer without causing overspending which leads to credit card debt.

The winter holidays are the most expensive time of year for most Americans. Retail estimates show shoppers will spend $727-$731 billion between November and December of this year. Experts predict that the average household will shell out about $1,048 to make the season merry and bright.

Considering that most Americans say that they don’t have the savings to cover a $500 emergency expense, it doesn’t bode well holiday debt. Fortunately for you, is here with the top tips for crafting an effective and frugal holiday budget. Use the tips you find below to make your holiday spending plan. And if you still run into trouble with credit card debt this year, call in the New Year to make a plan to pay it off fast.

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[On-screen text] How to Budget for the Holidays

The winter holidays are a wonderful time of year, but they’re also a time when people get into debt. With so many expenses, including gifts and big family dinners, it can be easy to turn to credit to get by.

You put things on your credit card with the idea that you’ll deal with the debt once the festivities are over. Then you wind up reeling in the aftermath, looking at all credit card debt you have to pay off. This is called a holiday debt hangover and it can be a nightmare to handle in the New Year.

If you want to avoid it, you have to plan ahead. The earlier you can start putting a plan together and getting it into action, the better. This gives you time to be smart and shop for the best deals, so you can spread out the cost over several months. And this is how you avoid amassing large volumes of debt in the last few months of the year.

Start by making a budget for all your holiday expenses. This includes not only a list of gifts, but also things like decorations, shipping and postal charges for cards, family meals, and flights and accommodations if you’ll be traveling.

The more detailed you can be in outlining all of the expenses you’ll face, the more you can plan ahead. With the right strategy, you can get through the holidays debt free and start the year on the right foot. Don’t forget to download our holiday money guide to have your best season yet.

If you’re struggling with debt or have other financial issues, give us all call to see if we can help. We’re A+ rated by the Better Business Bureau and have helped thousands of people become financially stable. When life happens, we’re here for you!

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How to make a holiday budget step by step

If you don’t already have a basic budget you use all year now is the perfect time to start. Better planning now will limit holiday stress and reduce your New Years’ Regret from overspending.

  • Review your bank account a see how much cash you have available
    • If this is non-existent review your credit card for available balance.
    • Rember there is interest on credit card purchases if you can’t pay them in full.
  • Now, write down everyone that you think you need to buy a gift for; if you know what you want to buy for that person list that, too.
    • Make sure to include everyone on your list, including:
      • immediate family
      • extended family
      • neighbors
      • bosses and co-workers
      • friends
      • kids’ teachers
  • Next divide that gift list into two categories:
    • People who need more expensive unique gifts and
    • People who can receive less expensive universal items or handmade gifts
  • For the second group, set a dollar limit on what you want to spend per person.
  • Within your family, also decide if you want to set dollar spending limits for each other; this keeps you from going overboard on gifts for the immediate family.
  • Now add in all your other holiday costs, including expenses:
    • Decorations
    • Food
    • Travel
    • Entertaining
    • Postage and Shipping
    • End of Year Tipping
    • Charitable Donations
  • Put all of this into a spending planner worksheet or spreadsheet with two columns for each holiday expense:
    • Planned Spending
    • Actual Spending
  • Total up Planned Spending to see how much you’ll spend over the season, in total.
    • Compare this to the cash you have available for holiday spending
    • If it’s too high, adjust your list to cut back or limit gift items
  • Once your list is ready, don’t shop without it; use the money-saving tips below to help ensure you stay on budget.
  • As you spend money over the holiday shopping season, be sure to note what you actually spent on each item.
  • That way, if you start to go over budget, you can cut some items off your list and stop spending!

Holiday spending tips

These tips can help you stick to your holiday spending plan:

  • Always shop with your list. This way, you can ensure you stick to the spending plan that you made. These days, keeping your list on your smartphone can be an easy way to ensure it stays with you. You can even in share it in your family cloud, so anyone can check something off if they buy it. Also have your list with you when you shop online.
  • Only take cash with you when you shop. Shopping with cash helps you avoid overspending and impulse purchases. You can only spend the money you have, so those holiday store displays don’t tempt you into spending on things you don’t need.
  • Consider using PayPal or prepaid credit. With so much online shopping, the holidays are a prime time for identity theft. Although credit cards limit theft liability to $50, giving a cyber thief access to your high-limit card can end up being a hassle to dispute. Debit cards are even worse, because liability limitations depend on when you notice and report the theft; if it’s reported after 60 days, there’s no liability limit.
  • At most, you should use 1-3 credit cards for holiday spending. This includes one low-APR credit card for most purchases. Then you can strategically use travel or rewards credit cards, as needed. We explain this more below.

Read Smart Personal Budgeting Tips to help yu stay on track

Ways to trim down gift costs

You can also improve your holiday budget by trimming down gift costs. Either reduce the number of people on your list or cut costs per person:

  • Set up gift swaps and exchanges. Instead of buying unique gifts among groups of adults, set up a Yankee Gift Swap or White Elephant Exchange. Each person buys a gift under a certain dollar limit, then you have a party where everyone opens and swaps the gifts out.
  • Don’t buy gifts for yourself or your pets. If you want something, it should be on your list for someone else to buy it for you. People now waste up over $100 each Christmas self-gifting; also, don’t buy for your pets – they have no idea it’s a holiday, nor do they care.
  • Buy in bulk or build gift baskets. For non-immediate family, there’s no need for unique gifts; either buy general, universal items that you can get cheaply at bulk discount stores or get drafty and make gift baskets filled with holiday items or baked goods.
  • Get the kids crafting. Handmade and homemade gifts are good for grandparents, teachers and neighbors. Just make sure to start crafting early so you have time to learn from mistakes.
  • Play Secret Santa or let your kids do it. This is where you do chores or other acts of kindness while someone is away from their home. You can mow lawns, pick up leaves, wash cars or shovel driveways, depending on the weather where you live. Kids can get really into doing chores for others when you make it a game.
  • Give actions instead of things. Gift your significant other a coupon book of dates or time together; give your grandchild a coupon book of fun outings. Or give of yourself through actions, like babysitting for a stressed mom.

Holiday decorating ideas on a budget

If you love to decorate for the holidays, it’s all too easy to overspend. So, how do you deck the halls without putting a serious dent in your wallet? Use these tips:

  • A fake tree is more cost effective. The cost of getting a real tree is something you incur annually. If you get a fake tree, you can usually get it for about the same price or less; then you can use it year after year.
  • Replace lights instead of strings. Let’s be honest, going through a light string to find the dud can be tedious, but it’s also basically free if you use the replacement lights that came with your string. Even if you need to buy replacements, it’s still cheaper.
  • Set up a decoration swap with friends or family. Inflatables and other yard art are one of the biggest expenses in holiday decorating. Set up a decoration swap among your friends or family to trade out holiday decorations. That way, everyone’s house looks new without anyone incurring new expenses. Just be sure to agree, in advance, what to do if something gets damaged.
  • Revitalize decorations that are worn out. Say you bought some glittery outdoor gift boxes that light up, as well as some outdoor ornaments for your trees. These types of decorations start to look worn and dingy after a few years. Instead of buying new decorations, get some glue and glitter and go to town to make those old decoration pop again.
  • Get crafty. Making decorations like ornaments at home is fun and a great project if you have kids. You can buy supplies and get a lot of decorative details for your house for the cost of one pricey piece of tchotchke from a store.

Read how to Avoid These Holiday Decorations Scams

Planning a holiday party on a budget

Another time when overspending occurs easily during the holiday season is for holiday parties. Between decorations, party supplies, food and beverages, things can get pricey quickly. That’s especially true if you try and offer a full bar.

  • Potluck is cost effective and easier on you. Instead of trying to cook 12 different hors d’oeuvres yourself or (even worse) an 8-course sit down meal yourself, make the party potluck. Everyone brings their favorite holiday dish or winter comfort food to share. It limits your expenses and keeps you from spending the whole day in the kitchen.
  • BYOB or at least BYOA. Alcohol is usually the biggest expense, especially if try to offer a full bar for cocktails. Instead of getting a dozen bottles yourself, ask guests to bring the alcohol they want. Then you can provide mixers and non-alcoholic beverages.
  • Buy in bulk. This is particularly good for those non-alcoholic beverages you need and other items that can be used later if they aren’t used up during the party.
  • Holiday parties are perfect for gift swaps. And you don’t have to set a high dollar limit to make this fun at a party. If everyone buys the dumbest thing they can find for $10-15, you can have a lot of fun with a White Elephant Exchange of your weird gifts.
  • Find cheap games to play online. Don’t waste money on adult party games. Most of these can be recreated with simple supplies you have around your house. Just Google “free party games” and go to town.
  • Decorate at the dollar store. If you aren’t satisfied with your regular home holiday decorations for the party, don’t go crazy with expensive home décor retailers. Instead, hit the dollar store and deck your halls on the cheap.

Christmas on Credit:’s Best Holiday Credit Card Tips

Putting Christmas on credit can get costly with interest charges

Let’s be honest: Most people depend on credit cards to cover at least some of their holiday expenses. But if you use credit during the holidays, then you need a game plan to minimize debt and maximize rewards. Follow these tips to develop the best holiday credit card strategy:

  • First, any cards that you plan to use for holiday shopping should start with a zero balance.
    • This way, if you pay off the charges within the first billing cycle, you make those purchases interest-free.
    • No interest charges ensure you get the most out of any rewards you earn.
  • Next, you should assign cards for specific parts of your holiday spending plan
    • If you have a rewards card that offers bigger bonuses for shopping at certain places, limit card uses accordingly.
    • If you have a travel credit card, use it to make your reservations and accommodations to earn miles.
    • Only use store credit cards if they offer rewards AND if you can pay off the balance in-full.
  • Everything else should go on your credit card with the lowest APR.
    • This minimizes interest charges, so you pay less money as you work your way out of debt.
  • Then, when the bills come in, pay off the rewards, store and travel credit cards in-full; make the minimum payment on the low APR card.
  • Once the other balances are gone, pay off the low-APR balance in the biggest chunks possible on your budget.

Christmas on Credit: Card Use

Card type Best used for Repayment plan
Low APR credit card Use for big-ticket purchases that can’t be paid off within a single billing cycle Minimum payments while you focus on your other card, then pay it off in chunks
Rewards credit card (cash back or points) Limit use to what you can pay off within 1 billing cycle; start with a zero balance to eliminate interest charges Start and end the billing cycle with a zero balance to use the card interest-free
Travel rewards credit card Use for airline reservations and hotel accommodations to earn miles Pay off quickly to avoid offsetting value of miles earned with interest charges
Store credit cards Avoid use unless the card offers incentives without time limits Always pay off store balances quickly, since these cards tend to have the highest APR

Why not put everything on rewards?

Putting all your holiday expenses on rewards credit cards is rarely an effective strategy. Remember, retail experts predict the average family spends close to $1,000 during the holidays. Most people don’t have $1,000 sitting around to pay off that full cost all at once; if you did, you would’ve paid for Christmas in cash instead of using credit.

Rewards that you earn are quickly offset by the high interest charges that come with most rewards credit cards. Even with excellent credit, the average APR on a rewards credit card is over 16% APR. At that rate, interest charges quickly offset any rewards you earn. That only takes 1-2 billing cycles.

For example, let’s say you put $1,000 on a cash back credit card at 16% APR. You earn 3% cash back on the purchases. The minimum payment schedule is a standard 2% of your balance.

  • With 3% cash back, you earn $30 on your holiday purchases
  • The minimum payment is $20
  • However, over $13 of that payment goes to cover accrued monthly interest charges
  • So, within 3 payments (just over 2, actually), you completely negate your cash back earning with interest charges.

This is why you should use rewards cards strategically in order to avoid interest charges. Otherwise, you really don’t “earn” anything.

Be careful with store credit cards

These cards tend to have relatively high interest rates even compared to other credit cards. It’s rare to see a store credit card that has APR less than 20%; many go much higher than that. They may also have stricter terms on repayment.

So, unless you’re earning good rewards AND you can pay off the balance in-full within the billing cycle the charges were incurred, steer clear! For the record, earning limited-time bonus cash to use in the store is usually not a good enough perk. The last thing you need in January is a push to spend more money while you pay off your debt.

Article last modified on December 1, 2022. Published by, LLC