Image of woman planning for holiday season.

How To Prepare For The Holiday Season Without Going Into Debt

4-Minute ReadUPDATED: June 03, 2022


Consumers tend to boost their spending in December, bringing a hearty and happy holiday to retailers. But good news for retailers could translate into big credit card bills for its consumers come January.

Spending that much and treating your loved ones is fine—if you can afford it. But many consumers can't, and many will feel pressured to overspend this holiday season, only to find themselves with a big credit card bill that they can't pay off in the new year.

But you don't have to fall into this festive Christmas trap. By setting a budget and having realistic expectations, you can still bring good tidings, save money and avoid falling into credit card debt this holiday season.

1. Set A Holiday List Budget

The key to avoiding holiday debt? Set a spending budget. And then stick to it. The retail momentum hasn’t slipped from last year – even with the coronavirus floating in the snowy air. Many home shoppers are simply turning for contactless options this holiday season instead, like online ordering and curbside pickup.

To set your holiday spending budget, first look at your overall debts and income. You only want to spend what you can afford to pay off in full when your next credit card bill comes due.

Also, keep in mind that holiday spending is more than holiday gifts. Deloitte, in its annual holiday retail forecast said that the average American household will still spend $1,530 this holiday season. You might want to buy decorations, food and seasonal clothes, too. Make sure to include these items in your holiday spending budget.

Once you’ve made a list of what you need to buy, assign a dollar amount to each item. If you know you only want to spend $20 on Uncle Phil’s gift this year, don’t splurge and buy him a $50 Bluetooth speaker. Stick to that budget!

William Taylor, a career development manager at Los Angeles-based MintResume, says budgeting helps keep him on track financially each holiday season.

"Remember, you aren't Santa, so you shouldn't buy presents for everyone you know," Taylor says. "And if you're worried that you might miss somebody, keep a few bottles of wine wrapped under the tree in case they visit you."

2. Be Realistic

As you’re drafting your holiday spending budget for Black Friday, you might discover you can’t afford to buy gifts for every relative and friend. And that’s ok!

Don’t break your budget by buying for them anyway. Instead, let them know that your finances won’t allow you to exchange gifts with them this year. They might be relieved, too, as it means they won’t have to spend money on a gift for you.

If you really want to get these relatives and friends something, consider DIY / homemade gifts or baking them cookies and other tasty treats. You might also buy them a few inexpensive lottery tickets. Just be careful not to break your budget with these extra items.

After all, the best gift of all is time spent together, right?

Avoiding holiday debt sometimes requires a more creative, realistic approach. Just ask Christopher Grozdon, chief marketing officer and co-founder of Austin, Texas-based digital marketing agency DASH-SEO. He's a big believer in setting spending limits during the holiday season.

"Whether it's $10 per person or $100 per person, stick to that figure as a max cost no matter what," Grozdon says. "This way, as you check off those on your 'nice list,' you'll never be surprised when you look at your credit card statement in January."

3. Don't Let Sales And Rewards Tempt You

It’s easy to overspend when retailers are flooding your TV, smartphone, and laptop with ads for half-price TVs, computers and sweaters. Resist the urge to buy something off your gift list just because it’s on sale.

If a sales item will help you tick a relative off your spending list – and the item is within the budget you’ve set for that relative – absolutely, buy it. But don’t buy a TV, laptop or smartphone just because it’s on sale if you’ve already completed your holiday shopping.

The same rule applies to credit cards that offer generous rewards programs. Yes, you should use that card as you’re checking items off your holiday shopping list. But don’t be tempted to buy extra holiday season items just to rack up more rewards points. And never run up purchases that you can’t afford to pay off in full when your credit card bill payment is due.

The extra rewards won’t cancel out the interest you’ll have to pay when you carry a balance.

4. Don't Spend On Yourself

We know, it's tempting as you are buying gifts for everyone else you know to splurge on yourself. After all, those shoes are 30% off.

But don’t do it! Add it to your holiday season wishlist and resist the urge to buy items for yourself until after the holiday shopping season is over. Then you can look at what you spent and decide if you have any extra money to spend on yourself. You might even be able to use gift cards that you received during the holidays.

"The holidays are a time when people can undo all the hard work that they put in throughout the entire year," says Amanda Ramkisoon, personal finance blogger and owner of The Frugal Mom Guide. "After budgeting and pinching pennies all year round, it only takes one shopping trip to set you back and get you into hundreds of dollars in credit card debt."

And if you do find yourself with significant holiday debt, you can always turn to a personal loan. Depending on your credit, you might qualify for a personal loan with a low-interest rate that will help you give generously and still pay off any high-interest-rate credit card debt.

A personal loan may also help you stick to your all-encompassing holiday budget in the first place. With a fixed loan amount and timely repayment period, you can make the holidays more manageable by sticking to your upfront, $2,000 budget vs. overspending.

Final Thoughts

Go into this holiday season with a guided vs. impulsive spending approach. But if your holiday season needs a few extra bucks, consider how a personal loan can help you stay in control by paying any upfront funds vs. juggling high-interest credit card debt in the new year. 

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