According to a recent Gallup poll, Americans plan to spend an average of $830 on gifts this season.
As the largest gift-giving holiday, the final months of the year account for nearly 20 percent of total annual retail sales for retailers—making it the costliest season of the year for shoppers. This is not surprising.
What is surprising is how much more money we spend during this season than any other. For context, shoppers spent $600 billion during the Christmas season last year. The next highest seasonal total was the “Back to School” shopping season at $72 billion. In other words, on average, Americans spend 9X the amount of money retail shopping during the Christmas season than any other season of the year.
Unfortunately, however, when the calendar turns to January, the negative effects of this spending begin to set in: higher than expected credit card statements, tighter finances than imagined, increased stress, and regret over the amount of money spent.
How can we avoid this January stress and regret? What steps can we take to avoid overspending during the holiday season?
Here are 7 ideas:
1. Set a Budget.
Before the holiday shopping season even begins, decide how much money you want to spend. Think through all the different aspects of holiday shopping: gifts, travel, food, decorations. Divide your budget into the different categories: how much do you desire to spend on gifts? how much will travel cost? how many special events are on your calendar and how much will they cost? If the numbers aren’t lining up, what changes and/or sacrifices do you need to make?
2. Be Aware of Retail Tricks.
If merely creating a budget was the only thing needed to keep us within our spending limits, we’d be all set—not just for the holidays, but for life. Unfortunately, this is rarely the case. Even with budgets firmly established, many of us overspend. One reason this happens is because retail stores are shockingly good at getting us to part with our money.
Loyalty cards, retail credit, decoy pricing, loss leader (think Black Friday), incentives to return to the store, constant sales—all of these represent tricks that retail outlets employ to get us to part with our money. Be on the look-out for them—especially during the holiday season.
3. Limit self-gifting.
One of the most significant holiday trends over recent years is the increase in “self-gifting”—people treating themselves to presents when they are out shopping for others. Nearly 60% of people are now self-gifting according to the National Retail Federation. We will spend, on average, $130 per person buying gifts for ourselves. To avoid overspending this holiday season, limit yourself in this regard.
PS: Be careful when purchasing gift cards, 72% of shoppers also do some shopping for themselves when going to a store or website to purchase a gift card.
4. Cut down on convenience costs.
Some of the most hidden costs of the holiday season are “convenience” expenses. The holiday season throws us out of our usual family rhythms by adding extra responsibilities and activities. As a result, the price we are willing to pay for convenience begins to rise—sometimes, it is just easier to order fast food when running late for an appointment or getting a pizza for the kids if we need to attend the office holiday party.
In addition, all of the time spent shopping often leads to other unnecessary purchases: expensive coffee drinks, pretzels, smoothies, just to name a few. These expenses appear minor. But over the course of a month, because of the “Latte Factor,” they add up quickly.
5. Establish expectations early.
If you decide to cut down on the number of Christmas gifts you will be giving this holiday season, it is important to establish those expectations early. For example, for our kids at Christmas, they receive three gifts from us: one thing they want, one thing they need, and one experience to share with the family. But it wasn’t always this way. When they were younger, before we decided to pursue minimalism, we used to buy them a lot more gifts at Christmas. Therefore, when we decided to make the changes to our gift-giving habits, we took some time to inform them about it.
Similarly, if you intend to take a new gift-giving approach to your extended family, it is helpful to inform them early about your decision and why you decided to make it.
6. Look for shortcuts to make travel cheaper.
For some families, one of the largest expenses of the holiday season is travel—this is certainly true for our family of four as we travel back to the Midwest each Christmas. Being together as a family to celebrate the season is important to us, and it is important to many others as well. And while there are always going to be expenses incurred while traveling, we can still look for ways to limit them: shop around airlines and travel dates, avoid baggage fees by packing light, pack meals for on-the-go, and do your research on hotel costs, just to name a few.
7. Track spending.
One key component to wise financial stewardship is to track your spending on a daily basis. This is true for life, but it is absolutely essential to avoid overspending during the holiday season. If you have set your budget thoughtfully (Tip #1), it is important to pursue due diligence in staying inside it.
Because of the extra shopping during the season, the importance of tracking your spending during the month of December cannot be overstated. And you do not need fancy software or materials to accomplish this step. It can be completed with a simple piece of paper and pen—at the end of each day, just record the items you spent money on that day. And compare it regularly with the budget you created.
Avoiding overspending during the holiday season may not be easy. It certainly requires extra time and effort. But trust me, your January-You will thank you for it.
Charleen Kepner says
I appreciated the thoughtfulness of your thoughts. I’m looking forward to a much simpler holiday myself. It’s hard to do with a family, but we are working together to make our family holiday simple and special.
me too. I plan on saving and cutting holiday spending in 2021
I love this post ~ and I have been guilty of the self-gifting in years past! Usually I’m very savvy and don’t allow myself to spend, so in the past I’ve used Christmas as an excuse to “make up for lost time” lol.
At church a pastor said something that really spoke to me: “Christmas is not our birthday.” It’s JESUS’ birthday. Therefore shouldn’t it be about giving to those who truly need it rather than ourselves… or even buying our relatives things they may or may not actually need. When buying for someone else I typically do an “experience” gift now instead of material… memories are forever!
Joshua, do you have any already created documents that you can share to assist in keeping track of one’s budget? I don’t have any accounting software, but would benefit from a document that would easily help me keep track of my spending.
thank you so much, Marcia
Stephanie L says
Thank you for reminding me about how happy I am to not have any credit cards! We Dave Ramsey’ed our way out of debt eight years ago and haven’t had any credit cards since then; the offers keep coming, but they go right into the shredder.
Wishing everyone a joyous holiday season.
This will be our third (or is it fourth) year of doing a much smaller Christmas for our kids and us. We didn’t start it due to minimalism, but because we wanted to teach our children to be thankful for what they have and not to be entitled. This has been such a blessing for our family in many ways. Before, we would have a budget, but always run out of money. It was very stressful to me.
On another note, we have always let our kids have simple birthday parties with some friends. I always hated how many gifts they ended up with that they didn’t need. This year, we pitched the idea to invite friends to their parties, but ask that they not bring gifts, instead they could bring $5-$10 for charity if they desired. My now 8 year old (she had her birthday today!) just had her birthday and raised $40, which she choose to give to Samaritan’s Purse. What a blessing to see that she thought this was a good idea and she feels so good that she could give to others in need.
Stephanie L says
Are you familiar with Kids Can Give, Too? http://www.kidscangivetoo.com/
Experience gifts all the way! We took the kids to a play (The Lion, the Witch and the Wardrobe) and will probably do one more family, holiday activity. And the things they get to unwrap will be from grandparents. Except for maybe an activity coupon to use with mom or dad. And they love it!
And really, our favorite Christmas thing is the nightly Advent reading by candlelight.
All my life i’ve received 1 gift . And the rest is yummy cookies and food and family time.
Michelle @ Modern Acupuncture says
Thanks so much for this post. My family and I are cutting down on gifts this year – in fact, we’ve all agreed that none of us needs anything. Honestly, we just want to have a lazy day together with good food, reading, and maybe watching a holiday movie. But no gifts. It’s nice to see this concept supported somewhere – most of my coworkers and friends think this idea is crazy, or not in the holiday spirit. But without the stress of spending, I get to just spend time with my family. What could be more holiday-oriented than that?
We pull names for the adults (with the rule that nobody gets their spouse’s name) and again for the cousins (nobody gets a sibling).
Everyone gets something they like, nobody has to buy for the whole extended clan. There is much consulting with people for ideas! And we have a $25 limit for those gifts, so nobody’s going into debt – that part started when a lot of us were still students, and has continued. One year the limit was set at $10, because everyone was broke. It was really fun to think of something special on a low budget!