While the holidays are a time of joy, they can also cause a great deal of financial stress. Buying gifts, hosting holiday gatherings, and traveling to see family and friends can add up, leaving many consumers feeling cash strapped and unsure about how to manage increasing expenses.

As a result, holiday shoppers often rely on debt to finance their sprees. In 2021, 36% of Americans took on holiday debt, averaging $1,249, according to a survey by LendingTree. Another survey conducted by The Harris Poll for NerdWallet found that 31% of those who used a credit card to pay for presents last year are still carrying those balances.

To avoid that fate, you might want to consider creating a holiday budget and developing a plan to stick with it.

Making the Numbers Work

The first step is to figure out how much you can spend. Start by writing down a range of what you think is reasonable given your current savings, cash flow and other expenses. Then, make a list of everything you plan on spending money on this holiday season, including not just gifts, but decorations, holiday outings, shipping, entertaining, cards and charitable donations.

Next, take your list and allocate a specific amount to each line item. You can make this as simple or complex as you want. Write it in a piece of paper, create a spreadsheet or download a budgeting app that will automatically calculate what you have left in your budget after making a purchase. Whichever method you choose, make sure your budget can be updated easily and is transportable, so you can take it with you when shopping. 

Check your List, Twice

Now that your initial framework is in place, it’s worth re-evaluating your budget. Look at it with fresh eyes and consider making cuts or developing alternative options. Do you really need a new dress for the office holiday party? Are there people on the list who might appreciate a homemade gift? Are there opportunities to stretch your budget by teaming with others to buy gifts? Would giving time instead of money be a better way to support your favorite cause? Approaching your list creatively can help save you money.

After finalizing your budget, devise a plan to stay on track. Record every purchase, so you can check items off your list and see the impact on your balance. This practice will also allow you to see how close you are to hitting your target allocations and will make it easier to adjust if necessary.

Here are some other strategies to help you stick your budget:

Do your homework. Always price shop and check out discount-focused blogs and websites, such as The Krazy Coupon Lady, that monitor and aggregate the best deals. Many retailers also provide a discount for subscribing to their email list, which you can unsubscribe from later. You’ll often find more bargains online, but make sure those savings aren’t diminished by shipping fees.

Practice Discipline. To stay in control, don’t buy anything that isn’t on your list. It might be tempting to pick up a new, heavily discounted TV, but those are the kind of impulse purchases that can put you over budget and in debt. Another good strategy is to create back-up options for the most in-demand gifts on your list. That way, you won’t be tempted to spend more than you should when supplies of this year’s hottest items run low. Buying last year’s models for electronics, sporting goods and other big-ticket items can also save you money.

Use a debit card or cash. Unless you pay off your credit card balance every month, financing holiday expenses with a credit card will end up costing you more in the long run thanks to interest charges. Debit card purchases are subtracted immediately from your bank account, which means you’ll be able to quickly see if you’re staying on budget.

Planning ahead can help you alleviate financial pressure, setting you up for a more enjoyable holiday season.

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