For most Americans, the final two months of the year are full of shopping trips. And when you have to buy everything from food to presents, the holidays can get expensive.
This holiday season, Americans are expected to spend a whopping $966.6 billion, which is a 3% to 4% increase from 2022, according to the National Retail Federation.
For the past two years, holiday spending reports have shown an upward trend. The average American spends more than $1,400 during the season, per CNBC.
The good news is that inflation has slowed, but the bad news is that overspending will still hurt you, per The Wall Street Journal. With interest rates at the highest they’ve been in the last two decades, getting into debt is the worst thing you could do.
Here are some ways to avoid overspending this holiday season.
What causes overspending?
A big cause of overspending is poor planning — which can add up fast when the holiday hype is at its highest.
Instead of going in blind, take an in-depth look at your budget records from the past three years to develop a good baseline for this year’s holiday expenses.
What are the effects of overspending?
Spending money you don’t have can lead to excessive amounts of debt, which limits your financial freedom.
Even if you do have the money, spending more during the holidays could reduce your savings and make you less able to respond when emergencies happen throughout the year.
How to stop spending money and save during the holidays
1. Make the commitment now not to overspend.
After figuring out a good budget for the holidays, commit to following it. Having a plan before you shop can strengthen your resolve to stay within your budget.
2. Group certain holiday expenses together.
Give yourself separate budgets for gifts, meals, parties, travel and anything else needed for the season, suggests Abigail Sussman, a professor at the University of Chicago’s Booth School who studies financial decisions. She told The Wall Street Journal that this approach will help you determine how much you spend for each person or each party.
3. Think about future you.
Future you probably won’t be happy with debt to pay off after the holidays, so it’s important to think of how overspending will affect you in January.
Prioritizing the things you really enjoyed during past holiday seasons will help you have fun this year without hurting your January self, per The Wall Street Journal.
4. Look for cheaper, alternative gift ideas.
If you have a smaller budget than last year, that’s OK. Gifts don’t have to be about the price tag. There are DIY gifts you can easily make or, if that’s not your thing, come up with smaller gifts that have meaning.