Holiday Shopping and Budgeting Tips to Control Overspending

November 9, 2022
Holiday Shopping and Budgeting Tips to Control Overspending

By now, retailers have made you aware that it’s the holidays. In fact, you’re probably drowning in mail catalogues, “tis the season” emails, and brightly colored shopping inserts shouting about deals and discounts. However, you’ve likely also heard mixed news that the economy may be in for a slowdown at some point.

To keep your spirits bright, we’re sharing 10 unique strategies for crafting a smart holiday shopping budget and 9 ideas for controlling your costs. Sticking with simple holiday budgeting tips will allow you to enjoy the wonders of the season and help you avoid the stress of end of year debt.

10 Tips for Preparing Your Holiday Budget

Toys, jewelry, electronics—holiday gifts typically account for around 25% of annual retail sales. That’s good news for those retailers, but it can often translate to significant debt for consumers once January rolls around. To avoid that, here’s are some holiday budgeting tips to help you stay on track and keep your season bright.

1. Set your spending limit.

Assuming you don’t have any holiday savings set aside, your holiday budget should be limited to no more than the amount of cash you have on hand after paying all of your other monthly expenses. If you’re coming up short, you might think about dipping into savings, however, we don’t recommend it. Keeping your regular savings or any emergency fund money intact is more important than over gifting and winding up spending beyond your means. (Eliminating any extras—like paying for grocery or takeout delivery–at least until after the holidays—could be a way to find the money you need.) The goal is to set a limit based on your actual cash flow without straining your overall budget.

2. Create holiday budget categories.

Holiday extras tend to fall into specific categories like decorations, gifts and wrapping, travel, and food. Take your total spending limit for the holidays and break it out into these categories, setting a limit for each. You can still shift amounts around in your categories—just keep it within the budget. For example, if you only spend half of your wrapping paper budget, you can use the remainder in another category.

3. Factor in credit card rewards.

If you’ve been racking up credit card rewards points, miles, or cash back throughout the year, consider factoring them into some of your budget categories. You can use them to book travel or redeem points for gift cards or merchandise to gift others.

4. Rework your budget categories.

Once you’ve figured out your spending limit for the holidays and tried to spread it out to all of your spending categories, you might notice some of those categories look a tad underfunded. So you might need to move things around and/or make some hard decisions. Consider breaking your categories into two lists: negotiable and non-negotiable. On the non-negotiable list, only include those expenses that are necessary for your family to enjoy the holidays.

5. Use budgeting tools and apps.

Personal finance apps such as Mint®, Personal Capital®, or You Need a Budget® (YNAB) let you track your holiday expenses for free (or for a low monthly fee in the case of YNAB) across multiple credit cards and bank accounts, making it easier to track gift purchases and stick to your holiday budget. Create a line-item in your budget that itemizes those holiday-related transactions and check your budget regularly from wherever you are.

6. Make a gift list.

Who’s been nice? Put names on your gift list with a spending limit for each. This may make you feel a little grinchy at first, but effective budgeting often comes down to making tough decisions. You can always revise your budget as you go, so long as you don’t go over your total spending limit.

You can also try breaking the list into categories like immediate family, extended family, close friends, work pals, etc. Then you can limit certain categories to certain kinds of gifts. For example, you might limit work pals to baked goods or low-dollar gift cards rather than store-bought presents.

7. Save early for large gifts.

If you feel like going big on some of your gifts—like a fancy new bike for your child, for example—start saving ASAP. The sooner you start finding ways to save money, the better chance you’ll have of affording those big-ticket items when it’s time to buy them.

8. Shop early for the best deals.

Due to overstocked warehouses, many retailers kicked off holiday sales early this year and already are offering deep discounts. You can compare prices at multiple retailers to find the best deals, sign up to receive emails about upcoming sales, and purchase this year’s hottest item before it’s sold out—or marked way up. And while Black Friday and Cyber Monday are among the biggest shopping days of the year, using coupons and discount codes could score you better deals overall.

9. Avoid shopping sprees.

While it might sound like a good idea to knock out all of your shopping in one whirlwind day, beware of the kind of momentum that can lead to budget-busting impulse purchases. Once you start swiping your credit card, it can be easy to get carried away in the “giving spirit.” If you have a tendency toward impulse buys, that’s all the more reason to create a strict holiday budget.

10. Shop for gifts year-round.

Labor Day, Valentines Day, Mother’s Day, Labor Day, Amazon Prime Day, the list of shopping holidays is long and the deals are many. Some savvy shoppers choose to buy gifts throughout the year to avoid the frenzy that comes with last-minute shopping. So consider keeping a holiday gift list handy year round and shopping during the entire year. This can also translate to more cushion in your holiday budget. After all, if you purchased a holiday gift for your sister over the summer, that’s one less person to worry about when the holiday season approaches.

More Holiday Budgeting Tips

If your fortunes have taken a turn for the worse recently or you’re working with a tiny budget, it may feel overwhelming to budget for the holidays. But you absolutely can—and should. In fact, the tighter your finances, the more you’ll benefit from a holiday budget. Here are some additional ideas for you to consider:

1. Pare down parties.

Holiday gatherings don’t come cheap, especially if you’re the host. Food, drinks, decor, gifts from (or for) the host, and party favors can quickly add up. Take a step back to consider your time and money. As a host, holding a potluck means you don’t have to buy and prepare all the food all on your own. Asking guests to bring their own favorite drinks to share and letting them know gifts aren’t necessary can make it more affordable for everyone.

2. Find online coupons.

You might be surprised to find coupon codes on deal websites you can enter in at checkout for savings. Deal and coupon websites might also share coupons that are accepted at physical stores.

3. Save on shipping costs.

Search for retailers who offer cheap or free holiday shipping to avoid shipping charges on any items you’re having delivered. Also keep an eye out for limited-time free shipping codes or special events like National Free Shipping Day, which takes place on Dec. 14 with participating merchants.

4. Opt for a Secret Santa with your family.

If you’ve got a big family or a large friend group, a Secret Santa is one of the best ways to limit spending around gifting. Let everyone pick a family member or friend at random and set a spending limit for everyone to stick to. This means you can be thoughtful with the one present you’re assigned to give, making room in your holiday budget.

5. Entertain at home.

Grab some bulk supplies and throw a cocktail party on the cheap, invite friends and neighbors over for a cookie exchange, or host a potluck and have guests bring their favorite holiday-themed dish and beverage.

6. Buy supplies in the off season.

One way to get lower prices on holiday items is to shop for seasonal merchandise during the off season—particularly in January when retailers are having holiday clearance or end-of-season sales. You can find toys, wrapping paper, decorations, and just about anything else if you know where and when to look.

7. DIY your gifts.

It’s the thought that counts, right? So don’t be afraid to dig into your box of special talents and get creative. For example, if you make amazing chocolate chip cookies, why not whip up a few batches and bottle the mix in mason jars to give as gifts? Your giftee can refrigerate the mix and bake the cookies whenever the mood strikes. The options for homemade gifts are endless—you just need to find what works for you.

8. Look for secondhand goods.

Thrift stores and online secondhand marketplaces are great places to find deals on pre-owned and used merchandise. Goods might be brand new, lightly used, or in good enough condition for your needs — all at a fraction of the price you’d pay buying them new. This could be anything from toys for children or a dining room set. The options are limitless.

9. Give the gift of you.

Watching someone open a present is one of the best parts of gift-giving — but it’s not the only way to show you care. GIving your time, energy, or resources is another feel-good way to share the joy without breaking the bank. Making a home cooked meal for a friend, organizing your sister’s closet/garage/etc, or taking your parents or grandparents out for a scenic drive are often more meaningful gestures than anything you could purchase from a store and quickly wrap at the last minute. Presenting these types of gifts can be as simple as writing the activities on a homemade card, or creating a “gift certificate” or “coupon book” with fun and decorative pages.

The Bottom Line

Budgeting is just another form of planning. The sooner you start making your holiday plan, the better positioned you’ll be to make the season bright and joyous. Committing to a cash-only budget, setting a spending limit you can stick to, and saving enough now to cover all your future holiday expenses can help you make the most of the giving season and approach the new year blissfully free of holiday debt.

And if you’re still paying down holiday credit card debt from last year, consider a holiday loan from LendingClub Bank. A holiday loan is an unsecured personal loan that can help you consolidate and pay down your debt. Our personal loan application takes only a few minutes and, once approved, you could get the funds fast.

Holiday Budgeting FAQs

1. What’s the best way to manage holiday spending?

Creating a budget well ahead of time. First set a spending limit, then divide your budget into categories and assign an amount to each category. Although you should stay within the limits of your budget, feel free to move money from one category to another if adjustments are needed.

2. How can you avoid holiday debt?

Commit to a cash-only holiday budget. If you can’t avoid the temptation of using credit, leave your credit cards at home when you shop. If you do use your cards, do your best to pay off the balance by the billing period to avoid accruing interest.

3. How far ahead should you prepare for holiday spending?

To maximize your time, reduce stress, and make the most of your budget, preparing for holiday spending should ideally begin about six months in advance. This provides you ample time to plan, build your savings, and take advantage of any sales or promotions during the summer months.

4. What types of expenses do I need to consider when making a holiday budget?

In addition to gifts, your budget categories might include food, decorations, wrapping paper, gift cards, travel, transportation, babysitting, tips, parking, dry cleaning and entertainment.

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