The holidays are meant to be a joyous time of year spent celebrating with friends and family. But as many of us know all too well, the gift-giving and travel that often accompany the holiday season can also bring significant financial stress — and debt. In fact, according to a recent LendingTree survey, 36% of Americans accrued some sort of debt over the 2021 holiday season, with the average amount exceeding $1,200.
But by doing some careful advance planning and sticking to a savings strategy, you can ensure that added debt is not among the surprises under the tree this holiday season. To prepare for the extra year-end expenses and get your finances ready for the “most wonderful time of the year,” consider these six tactics for avoiding new debt as a result of the 2022 holiday season:
- Estimate your holiday expenses — To get an idea of how much the holidays are likely to cost you, start by making a list of all the friends and family members you plan to buy gifts for. If you don’t yet know what you’ll be getting each gift recipient on the list, go ahead and assign a dollar amount that you expect you’ll spend on each. And to ensure that you’ve accounted for taxes and shipping charges, overestimate each allotted amount a bit.
Next, add in any other anticipated holiday expenses that you’ll need to account for. Will you be traveling for Thanksgiving and/or Christmas? And will you be hosting for either? Will you mail out Christmas cards this year? Do you plan to give a holiday tip to your mail carrier and any other service providers? Add in estimated dollar amounts associated with these and other upcoming holiday-season costs to calculate a ballpark total for your holiday spending.
- Build a budget — Once you’ve come up with an estimate for your total holiday-related spending, do the math to figure out how much cash you’ll need to put away each month between your savings-start date and the holiday-spending season to build up the required amount in savings. Once you have that amount calculated, weigh it against your current budget so that you can figure out how to make room in the budget for the holiday savings. For many people, good parts of the monthly budget to pull from include their entertainment and discretionary-spending allotments, but your own budget may present additional opportunities.
- Start saving early — Obviously, the sooner you start the saving process, the longer you’ll have to put the money away — and the less you’ll have to set aside each month. To simplify the process of saving, it may be helpful to open a separate savings account dedicated specifically to your holiday savings. This way, you can easily transfer the needed amount of cash to this account each month (or each payday), and it will be safely stored away and ready to access when the holiday spending season gets started. And in many cases, the savings can even earn interest while sitting unused.
- Look for opportunities to cut costs — Starting the process early can also provide you with another considerable financial advantage, as it gives you more time to be on the lookout for deals on gifts, as well as for other ways to cut holiday costs. For gifts, Black Friday and Cyber Monday typically present a range of savings opportunities. And to help you make the most of these, websites like blackfriday.com and theblackfriday.com often offer sneak peeks at major retailers’ doorbuster items, which tend to deliver the biggest savings. Further, popular coupon sites like retailmenot.com and couponcabin.com can provide codes and coupons that help reduce the price of gifts. And when you’re making online purchases, browser extensions like Honey and Rakuten can reduce the deal-finding legwork by automatically searching the web for coupons and promo codes, then allowing you to apply them to your cart instantly.
- Think outside the box — With some creative thinking, you can come up with ways to let your holiday spirit shine while lowering the financial burden for everyone. For example, consider organizing a gift exchange with a group of friends and/or family members in which each participating gift-giver is allotted just one other participating gift-giver to purchase a gift for. Each participant gets a gift, while each gift-giver has to buy only one gift, rather than separate gifts all around. (This might even allow you to dial up the budget on the single gift you’re responsible for and still save money, since you have so many fewer gifts to buy.) Of course, this may not be a popular plan for the children in the group — so if your group would prefer, the kids can still get gifts from everyone, while the grown-ups participate in the more limited gift exchange.
- Stick to the plan — Of course, the steps above aren’t nearly as effective if you don’t stick to the plan you’ve created. Do your best to stick to the budget you’ve built for each gift recipient on your list — and when you’re able to find deals on certain gifts, feel free to give yourself some added price-limit flexibility elsewhere. Overall, set a total spending limit for your holiday-related purchases, and do your best to stay under it. Keep in mind that if you can get to year’s end without busting your holiday-season budget, you can ring in 2023 without any added debt!
Proudly serving South Carolina since 1933, Arthur State Bank offers accounts and services to meet a variety of financial needs. To help you achieve all your financial goals, the bank offers in-person service as well as a range of convenient digital solutions. To learn how Arthur State Bank can help you with banking needs ranging from checking and savings to retirement accounts, mortgages, other personal loans and more, visit arthurstatebank.com.