Does your New Year usually start with a resolution to pay off all that debt you racked up during the holiday shopping season? If so, you’re certainly not alone. Holiday retail sales increased 3% in 2015, and many consumers carried that extra spending into the new year in the form of new debt.
The key to avoiding debt during the holiday season is pre-planning. Even now, with the holiday gifting rush approaching like a freight train, you’ve got time to prepare for the pinch. Here’s how:
1. Look at last year’s spending
To keep spending under control, you’ll need to make a budget. It can be hard to make a realistic holiday budget, though, unless you know what you’ve spent in the past. Without at least some idea of what you’ve spent in previous years, you’re stuck flying blind. So, now is a great time to pull out last year’s bank account statements and see what you spent on various holiday expenditures.
Write down a few of the major categories, such as decorations, food, party supplies, and gifts. Then, total up your approximate spending last year in each of these areas. These numbers will give you a realistic starting point for this year’s budget.
2. Make a Budget
Once you know what you spent last year, work on creating a budget for this year. Your budget can be as detailed or as vague as you prefer. That’s really a style issue.
For instance, you can budget a total amount for all gifts, or assign different budgets to your children, spouse, extended family members, friends, etc.
The key here is to leave some room for flexibility, and to be realistic. If you love giving gifts, don’t restrict yourself so much that you wind up just blowing your budget in the end. Instead, find other areas where you can cut back. Host one less party, or have a pitch-in so you spend less on food. That way, you can spend more on gifts.
Of course, part of keeping the budget realistic is to not budget more than you can actually afford. So you may need to look forward at your probable income and other expenses in the coming months. Figure out what you can free up, and create a budget that reflects what you can actually afford to spend.
For more guidance, check out our guide to creating a budget that works.
3. Set aside money each month
It’s never too early to start setting aside money for holiday spending. In fact, the earlier you start squirreling away, the easier it’ll be to save.
One option is to open a free checking or savings account. Then, have money automatically transferred into it each month from your paycheck. This makes savings painless and easier to handle.
Another route is to just create a budget category for holiday spending each month. You can let the money build up in your regular checking account (if you’re disciplined enough). Or you can start shopping early using this budget line item.
4. Start putting together wish lists
If you just started making gift lists (now that we’re in November), you’ve missed out on some serious potential savings. Next year, I would definitely recommend starting in October, or even September. Heck, you could even have your kids put together their wish lists as a summertime activity.
This is helpful for a couple of reasons. For one, starting early helps those you’re gifting — especially your kids — think more in-depth about what they’d actually like to receive for the holidays. It eliminates a lot of the whim ideas and temporary wants. Plus, it gives you more time to think about great (and affordable) gifts to give.
But if you are just getting started, no fear. Have your kids make a list today, and then make them revisit their ideas in a week or two. See if anything has changed. Ask family members to set up Amazon wish lists, so they can pick out various things as they think of them. And you can buy online, instead of trotting from store to store in the middle of the holiday rush.
Plus, with Amazon, you can wait until closer to Christmas to buy and then utilize free Prime two-day shipping. My favorite part? I buy and Prime ship everything to my parents’ house, so I don’t have to fly with all of the presents in my luggage. It saves me a LOT of money on baggage fees.
5. Shop early, shop often
Making gift lists early gives you more time to shop, as well, which means more time to take advantage of sales and specials. Start shopping as early as you can, and you’ll be able to take advantage of online and in-person sales for items on your wish lists.
One easy way to do this is to create your own lists for each person you’re gifting on Amazon. You can create private lists, too, but check them often to see if there are price changes on the items. When you see a decent price drop, snag that one right away.
If you shop using credit cards, you could also take advantage of the price change guarantees that many have. With some credit card companies, such as Discover and Chase, you get a price protection guarantee. This basically means that if you find the same item for a lower price after you purchase it on your credit card (within a certain timeframe), the company will reimburse you for the difference.
6. Order ahead for free shipping
Loads of online retailers offer free shipping these days, which can save you a lot of money. However, not all retailers’ “basic” free shipping includes a two-day transit time, like Amazon. With many retailers, you’ll need to allow for longer-term shipping of a few days or even a few weeks.
Shopping earlier gives you time to save on shipping because you can opt for slower, cheaper options. Waiting until the last minute could cost you big bucks in expedited shipping costs!
7. Choose the best rewards credit card
The goal, of course, is to keep from going into credit card debt that you can’t pay off during the holiday season. However, credit cards with great rewards can give you cash back, points, or retailer bonuses when you use them. Before you start serious holiday shopping, check out which credit cards have the rewards that will best suit your shopping habits.
For instance, the Discover it card offers 5% cash back on up to $1,500 in purchases from Amazon each October through December. This can amount to some serious cash-back savings, if you do lots of your holiday shopping on Amazon.
Check out a variety of cash back cards to see which one will net you the biggest rewards on your holiday spending. Then, be sure to pay off the balance each month with that money you’ve been saving. Then, you don’t have to worry about carrying your debt into the new year.
8. Do some DIYing
Giving yourself time to gather up gifts can help you save in other ways. For instance, you can use that extra time to whip up some DIY gifts. Even if you’re not incredibly crafty, you can make presents for at least some of the people on your list. DIY projects are great options for saving money on gifts for extended family members, friends, and your kids’ teachers.
If you’re a more experienced DIYer, Pinterest is full of excellent ideas for in-depth projects. You can get ideas for all sorts of gifts, from clothes to quilts to woodworking projects. You’re sure to find something for everyone on your list. Many of these gifts are super thoughtful and time-consuming, but could also save you from holiday overspending.
9. Book travel at the right time
November and December can be the most expensive times to travel, since so many others have the same idea of being home for the holidays. When you book your travel can make a difference, though.
According to one news article, the best time to book Thanksgiving travel is a surprisingly-late October 31st. The best time to book Christmas travel? Near the end of November. You can also save up your travel rewards card points throughout the year to offset some of your travel expenses at the holiday season.
10. Buy decor, gift wrap, etc. ahead of time
Don’t wait until you’re wandering the aisles of Target midway through December to buy wrapping paper and tree trimmings. You can often get these items much cheaper before the holidays, at discount shops and local dollar stores. Another option is to check out craft stores. Large chains like Michael’s and Joann will start running sales on holiday decor and wrapping paper months before you’re ready to decorate.
While you’re at it, put a note in your calendar to shop for next year’s decor and gift wrap at end-of-season sales this year. It’s amazing how much you can save on Christmas tree decorations when you buy them just after the first of the year.
11. Cut back on your budget
If you utilize all of these tips, but are still having trouble meeting the holiday pinch, you may need to find ways to temporarily cut back on your budget. Consider instituting a meatless Monday, and kick your grocery savings into your holiday budget. Or give up your morning latte in favor of coffee brewed at home.
Cutting back on these small expenses for a few months can give you more wiggle room. You can then use that money to give back to those you love during the holiday season.
No matter how much, or how little, you plan to spend this holiday season, the keyword indeed seems to be that: plan. Putting a budget in place, making lists early, and shopping as far in advance as you can, will be a big difference in how much you spend. And, they can give you a leg up in your efforts to start 2017 in the black.
Updated November 11, 2016 and originally published November 9, 2016.