The holidays are here, bringing that familiar urge to spend a little extra on the people we love. It’s a good feeling…until the bills arrive. If you’ve ever found yourself dreading your January credit card statements, you’re not alone. With thoughtful planning, you can keep your holiday joy intact without taking on holiday debt.
Begin with a Holiday Budget
It sounds like a buzzkill, however, creating a holiday budget can be liberating. Instead of worrying about where all your money went, you can confidently enjoy the festivities, knowing you’ve set boundaries. Make a list of everyone you plan to shop for and set a spending limit per person. Don’t forget the “extras” (decorations, meals, travel expenses, etc.).
As a rule of thumb, it’s wise to aim to spend no more than 1.5% of your annual income on holiday expenses. For example, if you make $50,000 a year, try to keep holiday spending under $750. This percentage can be adjusted based on what’s realistic for your situation. Having a target can be incredibly helpful.
Use Cash or Debit to Curb Impulse Buys
Credit cards make it easy to overspend, especially when retailers make holiday shopping enticing with promotions and discounts. Studies show that using cash or debit card reduces the likelihood of overspending. If cash isn’t an option, consider using a prepaid card specifically for holiday shopping. Load your budgeted amount onto the card and use it like cash. When it’s gone, it’s gone! It’s a simple way to keep spending in check.
Don’t Get Caught Up in the “Buy Now, Pay Later” Trap
“Buy now, pay later” (BNPL) options have exploded. Services like Afterpay and Klarna offer small, interest-free installment plans that seem harmless, and these little debts add up. A survey by Credit Karma found that 38% of U.S. consumers who used BNPL services missed at least one payment, and nearly three-fourths said they saw their credit scores drop as a result. If you’re tempted, ask yourself if you’d buy the item outright if you had the cash in hand. If the answer is no, it’s probably best to skip it.
Get Creative with Gifting
Homemade or personalized items often mean more to loved ones than store-bought gifts. Put together a “movie night” gift basket, offer a “free night of babysitting” coupon, or unleash your creativity with a painting or craft. These ideas cost less while allowing you to tailor a gift for someone’s specific interests and needs. If you’re celebrating Christmas with a large family or friend group, opt for a Secret Santa, so everyone buys just one gift instead of one for each person.
Plan for Next Year
It’s never too early to start planning for the next holiday season by opening a Christmas Share Savings. Small steps, like setting aside $20 or $30 a month, along with the dividends earned on the balance, can add up by the time next December rolls around. You’ll have a holiday fund ready to go, reducing the temptation to pull out the credit cards.
Bottom Line: Keep It Simple and Savor the Season
Remember that the holidays are about spending time with loved ones, not just spending money. Focusing on heartfelt interactions will create meaningful memories that last a lifetime.
For financial guidance including help with budgets and debt management, Keesler Federal members can take advantage of free financial counseling and other helpful resources here.