The holidays aren't cheap, which means it's important to set a budget. But even setting a budget and sticking to it can be challenging. According to a 2019 study by The Ascent of nearly 1,500 Americans who bought Christmas gifts last year, 56.3% set a budget, but only 64% actually followed that budget. Those who budgeted spent about $878, while those who didn't budget spent about $992. In addition, one-third of people overspent their Christmas budget, with the main area of overspending being gifts, followed by food, decorations and travel. Improve your holiday gift budgeting this year so giving gifts to your loved ones brings you and your financial situation joy.
Before you buy anything or make any holiday plans, figure out what you want and what you can comfortably spend.
"Don't spend more than you have," says Wilson. "The amount of money you are going to spend for the holidays should be based on your disposable income or ... your holiday savings."
Decide who you're going to buy gifts for including family and friends, colleagues, teachers, neighbors and others. Consider how much you'll need for other expenses like holiday decorations, shipping costs, tips for service providers and more.
"Make a list of all the gifts you want to buy, entertainment to do and any travel that may be necessary, compare the list to the budget and prioritize," says Paul Her-Sturm, assistant vice president of marketing at Credit One Bank. "You may decide to earn some extra money this holiday season to accomplish everything on the list."
*Track Your Spending
It's easy to get caught up in the excitement of the holiday season and lose track of how much you've spent and how you've spent it. "If you don't plan your spending and track your spending, it is easy to overspend," says Timo Wilson, CEO of Asap Credit Solutions, who advises his clients to rein in holiday spending. Tracking allows you to stick to your plan all through the season and adjust as necessary. Use a budgeting app, spreadsheet or just a pen and paper to create your plan and track it.
Snag the best sales and the best inventory early in the season. Her-Sturm recommends shopping ahead of the late-November rush. You'll avoid crowded stores and have time to compare prices and find deals.
Wilson recommends buying items on sale or with coupons. He also suggests paying with cash and avoiding credit cards. "(W)hen you use credit cards, it is hard to track spending so it is easy to overspend," he says.
When it comes to budgeting for holiday travel, overestimate your costs, advises Alex Miller, founder and CEO of travel site Upgraded Points. "There are likely things that will pop up that you didn't think of -- car services, public transportation, meals, etc.," he says. "When you've budgeted more for your trip, you'll be prepared." This is also a good time to use airline miles to offset ticket prices.
*Don't Go Into Debt
Christmas is a season of giving, but that doesn't mean you have to overdo it. "Gift giving can get out of hand and it's easy to spend more than you can afford because you feel guilty or frustrated," says certified financial education expert Galit Tsadik, known as the FINancial Sharktress.
"Talk to your family and friends about placing spending limits on gifts or create a system where you only purchase one gift for one person over the holidays," she says. Her No. 1 rule for holiday shopping is to stay out of debt. Setting limits will help you stay on budget and eliminate some gift-giving stress.
"Put an end to the vicious cycle by having these conversations now with your friends and family," she says. "(D)on't wait until the last minute so there is no pressure."
When it comes to holiday spending, sticking to what you can do, rather than what you could or should do, will help you give to your loved ones and give yourself a good financial start to the new year.