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.
emily says
I truly enjoyed reading your article. It’s so inspiring and I realized living simple with no clutter here and there brought joy in my life. Thank you for the encouragrment. You inspired me!
Jeffrey Pillow says
Last year my wife and I started doing the something you want, something you need, something to wear, something to read idea with our two children.
I think I learned about it through this website.
I noticed the Wellness Mama link you had up the other week also included this idea.
No matter, it has reduced our stress greatly because it puts a categorization on purchases with an emphasis on items that are needed, not wanted (except for one).
I second gifting experiences too. The best gift I have ever received was two tickets to the Mephistopheles play at the American Shakespeare Center in a neighboring city.
Just me, my wife, and a wonderful play.
And a babysitter for my kiddos :)
It is a shame really that the actual reason for Christmas has been supplanted by consumerism.
If only the wise men had not brought a gift each…
Emily says
We don’t actually know for sure that the wise men brought a gift each.
We know there was more than one wise man (it’s plural in the original).
We know they came bringing “Gifts of gold, frankincense, and myrrh.”
But we don’t know how many of them there were. There could have been 10 of them, splitting the cost of the gifts.
Jeffrey Pillow says
Don’t be that person
Emily says
Not trying to be.
Actually, I meant it as encouragement towards a simpler Christmas. My kids often “go together” on gifts for each other, and get one nice thing instead of a few cheap things that won’t last. Which totally fits with the minimalist ethos.
Jeffrey Pillow says
10-4. I thought you were nitpicking one word out of my comment. No worries. And, I’m with you on the gift-combining. We do that in my house too with my two little ones. It cuts down on junk gifts and they receive a gift they share which allows them to play together with one another and create fun memories that way.
Philip says
It might not have even happened……..
Josh says
We are doing the same thing with my wife’s family except we are doing something to eat instead of something to wear. We call it Victorian Christmas.
JH says
I love this article! :) We are doing the same thing for gifts this year, only we have added one more: Something you want, something you need, something to wear, something to read. It has really helped! My husband and I talk about what we are going to buy for our kids for each item (and we don’t overspend). Also, because it narrows down ideas for each gift, it has saved us time running around looking for something to buy, and just buying random stuff to put under the tree. All around, the kids will be happy to open four gifts each, and we will be happy we stuck with a budget and didn’t have to spend much time shopping!
FayJ says
We’re trying this 4-gifts approach this year too, ie. ‘something you want, need’ etc. It has helped me a lot in planning what to buy and my 8 year old son says he is happy with the idea too.
Hayley Richardson // The French Experiment says
@JH I love that idea! It’s new to me and I don’t have kids but it’s definitely one I’ll tuck away in my back pocket for when I do. Thanks for sharing!
Deborah says
I have envelopes for all my variable sending. Each month I put a set amount aside in my Christmas envelope. This way I know exactly what I have to spend each year and I find my thinking conforms to the budget.
John P. Weiss says
The self gifting tip. Yep, guilty. I shun shopping malls and like to give some of my artwork as gifts. But then I go to the art store and…that’s where the self gifting dilemma starts! Thanks for the advice!
Jennifer says
My husband and I decided on a budget for Christmas a few years ago, then we set aside a little bit each month so that we have the total amount saved by Christmas. This year, we have decided to do more homemade gifts (apple butter, strawberry jam, etc.) so we probably won’t even end up using half of what we have set aside. It’ll be nice to add that to our investment accounts come January!
Simon says
Bravo! I think the key word is “save”. For something as predictable as Christmas (Same Date, Every 12 months) planning your budget and managing our own and ‘others’ expectations should be a breeze. Less debt, less stress and maybe our christmas could be more about what matters most, people!
Jan Ramsey Brick says
I love your three Christmas gifts idea. And it ties in perfectly with the three wise men’s gifts. A teaching moment tied in with practicality! :)
I used to think I had to have lots of boxes to be unwrapped or my kids wouldn’t get that magical Christmas morning moment. How silly of me. Our family being together is all the magic we need for Christmas morning.
Thanks as always for your wisdom.
Kalie @ Pretend to Be Poor says
These are great, practical ideas. I love the 3 gifts you give your children. We want to give our children a fun Christmas morning without adding a lot more useless stuff to our home, and without detracting from what Christmas means to us spiritually.
I use an Excel spreadsheet for our Christmas budget each year. In fact I just edit the previous years’ sheet, which saves time and helps me establish a baseline budget that I can tweak depending on the years’ needs.
Frederick says
In hindsight, it was actually one of those ‘retail tricks’ gaining popularity about 15 years ago, the odious gift card, that turned me towards the path of minimalism. Seeing everyone exchange identical lumps of plastic coated currency was just so sad. So my spouse and I decided to end all gift purchases. Instead we pick a theme every year (candles, soap, lip balm, marinara, soup) and handmake gifts for our families and close friends.
ren says
Omg I thought it said marijuana, then re-read marinara… Still chuckling…
Tami says
I love the pick-a- theme-of-the-year idea. I kind of end up doing that, but never thought of it like that. I think if I make a plan to stick to a theme, that will eliminate most of the stress of coming up with ideas. Thank you for this!
Judy says
My work has been insane, Joshua. At the end of the day…I am so glad it’s someone else parting with their money and not me. People are using their credit cards like it’s free. You are so right—I will also be the one taking their payments in January! :)