How to Avoid Going in Debt for the Holidays

Make a List and Check it Twice

avoid going in debtOne of the easiest ways to limit the chances of going in debt is to plan your purchases.

Did you know that 80% of impulse purchases are made because consumers perceive value when the item is on sale. Why do you think retailers have sales around the holidays? Because research tells them that you are more likely to spend more when the item has a big red sign that shows how much money you will save if you make the purchase.  I always have to chuckle to myself when the grocery store cashier tells me how much money I saved and even circles it on my receipt! In case you were wondering, every time you go to the store and spend money you are NOT saving money. Saving money involves 1) not spending money and 2) moving the money to a savings account or investment with the intent not to spend it. Leaving the money in your checking account only to spend it later does not count as saving money as retailers would have you think.

Avoid Stuffing the Stockings

When I was a kid we would wake up Christmas morning and rush downstairs to open our stockings.  They were filled with sweets and things like cologne and a small inexpensive toy. What made it special was not the value of the contents of the stocking but the knowledge that my stocking would hold things like a giant candy cane, chocolate coins and an orange that were traditional gifts in my family.

Recycle Gifts

How many times have you participated in a Secret Santa at work and received a gift that you either don't need or already have at home? Why not find that unwanted gift a new home with someone that would appreciate it more? While I would never regift something that a relative or close friend gave to me, I have recycled a few Secret Santa gifts, shhhh don't tell!

Set a Spending Limit and Stick to It

Setting a spending limit is such a simple idea and is a must if you are to avoid going in debt. Budgeting and purchasing inexpensive gifts for coworkers, family and friends during the holidays can save you a small fortune. My family does a grab bag gift exchange for the holidays and we set a spending limit to keep it manageable for everyone. One way to do this is to use last year's holiday spending and set this as your starting point for the following year's budget. In order to make sure you have the cash saved in time for the holiday shopping season, take last year's spending and divide by 11.  Why 11 you ask? This will give you the amount you need to set aside in a savings account each month January thru November so that you have the cash on hand come December.

Track Spending

Creating a budget or spending limit is the first step to avoid going in debt. The next step is to keep track of your spending. There are plenty of smartphone apps such as Mint or Xpenser to automatically track your spending for you. No smartphone? Don't let that be an excuse for being in the dark about your spending habits. Paper and pencil work just fine. Keep a log with a running balance and enter each receipt as soon after your purchase as you can. Keep your spending log in your checkbook so you can update it as soon as you make a purchase and don't forget to record purchase made by others in the household.

Plan Ahead

By planning ahead and making purchases during the off-season when savings are best you can stretch your holiday budget and avoid the need to use credit. The best time to buy holiday season items is right after the holidays when retailers are clearing their inventories to make room for other merchandise. You can save up to 75% by waiting until after the holidays to purchase those Christmas Lights or holiday decorations.

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24 Responses to How to Avoid Going in Debt for the Holidays

  1. noor 07/06/2017 at 8:57 am #

    You can stock-pile your gifts on the cheap and come December you’ll be set and your credit card will get very little use. This works wonders for my wife and I.

  2. Paul 12/30/2012 at 1:12 am #

    I find that if I don’t do that I won’t have the needed cash and I end up dipping into my emergency fund. I’m pretty good about setting spending limits and sticking to them.

  3. Kay Lynn 12/29/2012 at 5:43 pm #

    I set a gift budget for the year in January and save a set amount each month for it. Then when making my list I just make it fit the budget.

  4. Paul 12/22/2012 at 9:34 pm #

    Kind of crazy to think about how many people are out there with no idea what they are going to buy only that they are going to go home with a gift!

  5. Paul 12/22/2012 at 9:29 pm #

    We bought a used Little Tikes play set for my daughter and probably paid 1/3 the price of a new one. It was new to her and she got years of use out of it. We sold it to another family when she outgrew it.

  6. Paul 12/22/2012 at 9:24 pm #

    We are in a couple family grab bag gift exchanges and we set a spending limit so that helps. I also try to set spending limits as you do and stay as close to them as I can.

  7. Paul 12/22/2012 at 9:16 pm #

    Great tip Glen! I often will wait after I first decide I want to make a major purchase also. That helps take the emotional factor out of the buy decision!

  8. Paul 12/22/2012 at 9:07 pm #

    I’m impressed Kyle! I’m not that organized to start that early! I usually start my Christmas shopping in November.

  9. Paul 12/22/2012 at 9:04 pm #

    I use an envelope and put all the receipts in it as soon as I get home from shopping. I also add the amount on the back of the envelope to a running total. I always know how much I spent and who I spent it on.

  10. Paul 12/22/2012 at 9:01 pm #

    Stockings can be really expensive. We used to put smaller gifts (not necessarily inexpensive) in stockings along with gift cards and it was really getting expensive. Now I just do inexpensive fun gifts for the stocking and everything else goes under the tree.

  11. Melissa 12/22/2012 at 6:37 pm #

    We do that too. As long as the toy is in good condition, why not?
    I bought cookie cutters for a few cents after Christmas last year and just used them this week with my kids to make Christmas cookies.

  12. Felix Lee 12/22/2012 at 9:06 am #

    It would be terrible to go in debt on the holidays. I have an inclination to re-gifting things I won’t use, but I don’t want to get caught. That would be embarrassing. Setting a budget and sticking to it seems like an easy enough plan. I just have to make sure I don’t get tempted with any of the sales!

  13. jefferson @SeeDebtRun 12/22/2012 at 7:27 am #

    Really good tips, Paul.
    You really should have an idea of what you are wanting to buy BEFORE you go to the store.

  14. Boris 12/20/2012 at 3:47 pm #

    These are great tips. I may add “remove the credit card from the wife”. I think it’s essential for any hubby not to go into debt! 🙂 Happy Holidays.

  15. Midlife Finance 12/20/2012 at 12:35 pm #

    Great tips! I also got used toys to mix in with a new toy. Our kid doesn’t really care if it’s brand new at this point.

  16. John S @ Frugal Rules 12/20/2012 at 6:25 am #

    Great tips! We use many of them each year. We set a budget and cap the amount we spend on each person. It makes it so much easier to do our shopping and it gives us the freedom to spend what we have allocated.

  17. Glen @ Monster Piggy Bank 12/20/2012 at 3:55 am #

    Impulse purchases can be a killer to your budget.
    I try to set a rule in place not to buy anything until a at least a week after I first wanted it. If I still want it at the end of the week then I try and make room in my budget for it. Most of the time I find that I have convinced myself that I don’t need it and end up saving my money.

  18. Kyle @ 12/19/2012 at 10:09 am #

    Great points. I would piggyback on your Plan Ahead idea and add for next year to buy gifts throughout the year when you find great deals. You can stock-pile your gifts on the cheap and come December you’ll be set and your credit card will get very little use. This works wonders for my wife and I.

  19. Michael @ So You Think You Can Save 12/19/2012 at 8:11 am #

    All very good points. Tracking the budget is probably the most key one I’ve seen that can be the difference maker. Often, we are buying so many gifts for so many people that we underestimate what we’ve spent per person, so we ballpark it, only to find that we spent more on everybody on our list than we thought once we add up the receipts. Tracking as you spend is the best method to avoid this type of surprise.

  20. Catherine 12/19/2012 at 8:08 am #

    Great post. Hubby and I did a cash Christmas this year and it felt great to make a list, budget and stick to it! Stocking stuffers can get outrageously expensive. We opted not to do them anymore. We’ll do one for our daughter when she’s older (since the stocking was always my favorite!) but hubby and I don’t need to be wasting the money on one for each other since it’s always filled with crap we don’t need or will buy when we need it haha.


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