For many people, the winter holiday season is an opportunity to indulge, and not just on special treats. A lot of extra shopping occurs during this time, on everything from parties to gifts. It all adds up, and this year people plan to spend more than ever.
According to a 2024 KPMG Consumer Pulse , U.S. consumers planning to spend 4% more on holiday expenses this year compared to 2023, reaching an average of $948 per person.
That’s jolly if you can afford to drop that much, but that’s not always the case. A 2024 Morning Consult found that 20% of U.S. adults said they’ll have to go into debt to pay for holiday celebrations and obligations.
While it’s tempting to borrow for what you can’t afford, it’s rarely a good idea. The pleasure will be temporary, since you’ll soon be facing the bills. Here are 10 great ways to avoid holiday debt.
1. Calculate real holiday costs
“With inflation rates and rising prices, it may be harder to buy last-minute impulse gifts or squeeze in a few extra presents,” explained Courtney Burrell, a senior financial professional at Empower, in an email interview. “Create a list of all your holiday expenses first.”
Be careful to be comprehensive, including such common expenses as decorations, travel, events, entertainment, cards, wrapping paper, food and shipping charges. Tally it all up. With this information, you can avoid being caught unaware and out of money, and scrambling to pay for it all with a credit card.
2. Set your personal limit
Based on your real holiday costs, determine what you truly want to spend. “How you allocate your holiday budget will depend on what’s most important to you,” Burrell said.
“This year you may prioritize travel to visit family that you typically only see during the holidays over decorations, or cut back on social commitments in order to give yourself a larger budget for holiday gifts,” she said.
When you reach a comfortable spending figure and you know you have that amount of cash in your bank accounts, consider it your personal spending limit. Commit to keeping your spending at or below your limit.
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3. Delete your charges in real time
Credit cards are not just secure and convenient. If your accounts have a rewards program, you will be accumulating cash, points or miles as you charge.
However, it can also be when the limit on your card is high. Keep in mind that it’s money you have to repay, and it won’t feel so good when the bill comes in.
This year, consider adopting a new approach. Put your banking app on your phone, and every time make a charge, transfer that exact amount from your checking account to the credit card account.
You’ll stay out of debt, won’t have to make a monthly payment and your rewards won’t be devalued by applied interest.
4. Use money in your wallet
“An effective and often overlooked method is using a cash-only system for holiday purchases,” says Jeff Rose, certified financial planner and founder of the website GoodFinancialCents.
“It’s simple. Withdraw a set amount of cash based on your budget and use only this for all your holiday spending. This tactile approach makes you more aware of each dollar you spend, reducing the likelihood of overspending compared to swiping a card,” Rose says.
Just be sure to keep all of your receipts in case you need to make an exchange or return, and keep a close watch on your wallet. Unlike with debit and credit cards, if your cash is lost or stolen it’s likely gone forever.
5. Track holiday spending with spreadsheets and an app
Even with the best intentions, spending can spiral out of control during the hectic holidays.
To prevent that, Amanda Webster, chief operating officer of Fund&Grow, a company that helps businesses secure funding, says to create a spreadsheet on Excel, Google Sheets or Open Office with everything you want to buy.
“You can break your spending down to show your total spending as well as how much you’re spending per person,” Webster says. “You should also note whether any of these new charges come with special promotional terms or need to be repaid before a certain date.”
Refer to the spreadsheet before shopping and update it after.
Consider using one card for your purchases, too, so you can see where and how much you spent on a single statement. “This also makes it a lot easier if you have to make any returns or exchanges after the holidays,” Webster says.
Before heading out, enable the mobile alert function on your credit card’s app. This way, you can monitor your transactions as you go along, since the company will send purchase notifications to your device in real time.
Another option is to use a money management app that will ping you when you’re nearing your allotted budget.
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6. Offset inflation with discounts
The KPMG Consumer Holiday Shopping also found that 39% of consumers prefer to do their seasonal shopping online. If you’re among them, take time beforehand to research all available discounts that you can quickly apply to your cart.
Since , you may be spending much more on things you usually buy for the holidays. You don’t want the difference turning into consumer debt that you’ll have for months.
“Many of my clients use Honey, a free browser extension that automatically finds and applies coupon codes at checkout,” says Steve Sexton, CEO of Sexton Advisory Group.
“I use it, too. It’s really easy. You can get coupons and promo codes at thousands of stores, and even book travel. Lowering costs is key right now,” he adds.
7. Sell items and shop with the profits
It is entirely possible that you can escape the holidays without spending a penny of your savings or using your credit cards for all the things you want.
Look around your home and yard now. Chances are you will find at least a few valuables that you don’t need but that you can sell. You may be surprised by how much you can earn.
For example, you may have upgraded your phone but the previous model is gathering dust in your drawer. Check to see how much you can get for it on sites like Swappa, where an Apple iPhone 14 Pro Max in good condition can put about $478 in your pocket.
You may also have unused sports and exercise equipment, furniture, clothes, jewelry, artwork and other items that you can .
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8. Lower your gift giving budget
The . If cash is tight, Sexton recommends gift exchanges such as Secret Santa or white elephant, where you only buy for one person. Or gift your loved ones homemade baked goods, scrapbooks or handmade ornaments.
“One year, I put together recipes from my mom, made them into books, and gave them out as gifts,” Sexton says. “People loved them. Seeing everyone I love at a potluck is also very cool, and can be very inexpensive.”
9. Charge on a new card, win a bonus
This may be the perfect time to open a new that offers a high sign-on bonus. After charging a certain sum within the designated time frame, the company will reward you with money. As long as you don’t carry over debt, you’ll have a net gain.
Just one example is the . It offers a $200 statement credit after you charge $2,000 within the first six months.
Consider how a deal like this might work for you. Perhaps you decided on an $800 on holiday shopping limit. Charge those purchases and pay the bill in full. As long as you spend another $1,200 over the next six months, the $200 bonus is yours.
10. Redeem your credit card rewards
You may not want to touch your credit cards at all this year, and instead pay for everything with cash or a debit card connected to your checking account. That’s fine, and will guarantee that you won’t accumulate any debt.
However, if you have r and have used it liberally in the past, log into your accounts or check your app to see if you have any rewards that you can redeem.
You may be eligible for cash backor can use your rewards to purchase gift cards for you to spend during the holidays (or give as presents). If your cards offer rewards as points or miles, you can usually trade them in for cash or , too, though the best value is typically for travel.
Finally, imagine a debt-free New Year
Clearly there are many methods you can put into place to prevent getting into debt as you are preparing for and enjoying the holidays. But one of the most effective strategies is to plan ahead and think about how you will feel when opening your credit card statements.
“Carrying over credit card debt is a heavy burden,” Rose says. “Imagine starting the new year with complete freedom to start the life you want.” Lean into that feeling and let it guide you toward making financially healthy decisions, now and in the future.
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Update 11/26/24: This story was published at an earlier date and has been updated with new information.