It’s the most wonderful time of year – and the most expensive.

While the holiday season often brings joy and celebration, it can also stretch our budgets to the limit.  Between social gatherings, travel, and the spirit of gift-giving, it’s easy to overspend and quickly build debt.

The best way to avoid entering the new year with the burden of holiday debt is to start the holiday season off with a solid financial game plan. With the holidays just a few months away, now is a great time to start!

Keep in mind these helpful tips for saving money while making the most of the season.

Review last year’s spending

Looking back on last year’s spending is a great place to start. Review your bank and credit card statements to see what you spent money on last holiday season. Ask yourself:

  • Were you happy with your spending? 
  • Are there spending categories that no longer serve you? 
  • Has anything changed in your overall budget between this year and last? 

If last year’s spending aligns with this year’s budget and goals, those numbers might offer some good parameters for this year. If you overspent, now is the time to set a more realistic budget and stick to it.

Create your budget

Once you’ve determined what you can comfortably spend this year, divide that budget into categories such as gifts, dining, travel, and miscellaneous. This approach allows you to stay within limits while ensuring every dollar serves a purpose. Be realistic about your income and prioritize the areas where you’d like to splurge (like travel or gifts) and where you can cut back (like decorations or extravagant gift wrapping).  

Build your budget over time

Develop your budget as early as possible and start setting aside a little bit of money each month.  By spreading out your holiday spending, you can avoid big credit card bills and high interest that hit all at once.

A great way to build your holiday budget is by opening a separate high-yield savings account for your holiday spending. Keeping money in a high-yield savings account will help your money grow more quickly than a traditional savings account and can prevent temptation to dip into it beyond your budget.

Shop early and mindfully

Don’t wait until the last minute to start shopping – that’s when you might end up panic-buying and overspending. Most stores have sales in the months leading up to the holidays, like Labor Day, end-of-season, and back-to-school sales. The more time you give yourself, the more intentionally you can shop.

Many retailers will use the emotional power of the holidays to tempt you to buy more. Be aware of holiday marketing tactics and try to stick to a clear shopping plan.

Consider using a cash-only system

It can be difficult to understand just how much you’ve spent when you rely on credit cards – especially if you aren’t tracking spending as you go. By physically handling your money, you are more likely to weigh each purchase carefully. This approach can be helpful for those who struggle to resist impulse buying during the holidays.

Withdraw the total amount you’ve allocated for holiday expenses and divide it into envelopes labeled for each category. For online shopping, you can load a pre-paid debit card with a set limit. Once that money is gone, your spending in that category is done.

DIY gifts and low-cost experiences

The gift of your time is priceless and often outshines the latest trendy item on the market. Get creative and think of low- to no-cost gifts and personalized experiences that your loved ones will cherish. The thrill of a material gift can be fleeting, but the memories you can create through these moments are everlasting. Hosting potlucks, Secret Santa gift exchanges, and group gifting are a few options for keeping costs low, and can be memorable experiences to share with loved ones.   

You don’t have to sacrifice joy or break the bank to have a successful holiday season.  Keep these tips in mind to avoid financial stress and holiday debt this year. Developing a solid holiday budget allows you to stay on track with your financial goals while savoring the magic of the season.  

For more tips, contact a Poppy Bank team member at (888) 636-9994 to discuss holiday budgeting and smart spending.