7 Ways to Avoid Overspending and Debt at Christmas

By Bethany Hickey

It’s easy to “buy now and worry later” when you’re feeling generous this holiday season. But if you often enter the new year with high debt and regret, here are some things you can do to help avoid overspending.

1. Avoid using your credit card for gifts

If you’re prone to overspending or frequently forget to pay off your balance, avoid the temptation of the buy-now-pay-later trap with credit cards.

US consumers currently have over $1 trillion in credit card debt, and over half (56%) of Americans report they plan to pay for some gifts with their credit card, according to a Finder survey on holiday spending statistics. Most Americans (42%) also report that they plan on spending $20 to $49 per gift.

If you have a large family or lots of friends, spending an average of $35 per gift can add up quickly, especially if you use a high-interest credit card and let the balance sit. However, if you want to use a rewards credit card for the sake of saving some money, that can be a good play — just be sure only to spend what you can immediately pay off to keep debt in check.

2. Cashout credit card rewards

The holiday season is a great time to cash out your credit card rewards. We’re all guilty of saving those points for some far-away purchase, but those rewards aren’t of any use if they’re not used. You worked hard for those rewards, and now is the time to harvest the fruits of your labor to avoid borrowing more money this Christmas. And if you’re not sure what to use those rewards on, move it into your savings account to start accruing some interest.

3. Make a budget — and stick to it

Creating a Christmas budget sounds easy, but it can be hard to follow through. For ease, set an overall holiday budget that would include all things holiday, such as $300 for everything. For example, this could mean $200 for gifts, $50 for decorations and $50 for other expenses.

If you need extra help with crafting a holiday budget, there are many budgeting apps such as Dave, You Need A Budget (YNAB) and Mint.

4. DIY some presents

You can’t make every single present at home, but you can DIY some gifts to save some money and offer a personal touch this season. Some great homemade gifts include:

• Baked goods
• Salt dough ornaments
• Bath bombs
• Sugar scrubs
• Jars of jelly, spices or hot chocolate
• Stove top potpourri
• Candles
• Framed photos or custom calendars

5. Do a white elephant or Secret Santa exchange

Doing a gift exchange can reduce gifting stress and save a lot of money. If you’re hosting a holiday party, consider doing a Secret Santa or white elephant gift exchange. This way, each person is only required to bring one gift, and it’s a great way to ensure everyone gets at least one present without breaking the bank.

6. Compare prices, take advantage of discounts and shop smart

This feels like a no-brainer, but it does take some effort to compare prices before you buy, and locating discount codes and coupons can take time. But if you’re intent on not racking up holiday debt this year, the extra effort is worth it.

There’s also the “convenience” tax we tend to put on ourselves, which can mean paying extra for fast shipping or buying something right now because you want to finish shopping. Don’t rush any purchases, take time to compare prices and consider shopping in person to avoid paying extra for rush shipping.

7. Start saving up for next year now

There are short-term savings accounts designed specifically for holiday spending, often called Christmas club accounts or Christmas savings accounts. While it’s too late to start one for this season, you can start one next year.

They work like this: You open the account early in the year, make deposits and earn interest throughout the year, just like a traditional savings account. The unique part of Christmas club accounts is that most come with early withdrawal penalties to dissuade you from withdrawing funds too early. It varies, but most Christmas club accounts deliver your funds in October or November, just in time for holiday shopping.

If you don’t want to risk paying a potential withdrawal fee, look into a regular high-yield savings account instead.

Don’t fall to the pressure of overspending

You wouldn’t like to hear that someone went into major debt just to afford a present for you this year, so don’t feel the pressure to do that to yourself. Gifting feels great, but if you overdo it, your wallet won’t feel so great next year — gift yourself the feeling of being debt-free this holiday season.

About the author:

Bethany Hickey is a personal finance writer at Finder, specializing in banking, lending, insurance, and crypto. Bethany’s expertise in personal finance has garnered recognition from esteemed media outlets, such as Nasdaq, MSN, Yahoo Finance and AOL. Her articles offer practical financial strategies to Americans, empowering them to make decisions that meet their financial goals. Her past work includes articles on generational spending and saving habits, lending, budgeting and managing debt. Before joining Finder, she was a content manager where she wrote hundreds of articles and news pieces on auto financing and credit repair for CarsDirect, Auto Credit Express and The Car Connection, among others. Bethany holds a BA in English from the University of Michigan-Flint, and was poetry editor for the university’s Qua Literary and Fine Arts Magazine.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Personal Finance