Holiday Budgeting: How to Plan for Every Expense This Season

For many of us, the holidays can be a time to travel to see loved ones, swapping gifts and partaking in bakeoffs. And if not careful, you can easily get swept up in holiday cheer and find yourself spending far more than you can afford. Soon enough, the merriment can morph into a bout of regret and despair.

Overspending and spiraling into holiday debt hangovers are all-too-common. Estimates from the National Retail Federation (NRF) anticipates spending per person to hit a record high of $902 this year. And a LendingTree survey reveals that in 2023, about a third of Americans went into debt during the holidays. The average debt load was $1,028.

To help you stick to your budget, avoid racking up a card balance, and ward off financial stress, we'll walk you through our favorite tactics on how to avoid overspending during the holidays.

Look Before You Leap into Holiday Spending

Before you take the plunge and go hog wild with holiday spending, you'll want to do a bit of planning. First, take stock of your current financial situation.

This includes:

• Cash flow: How much money is going in and going out each month. When you get paid, and your different sources.
• Savings: Whether you have existing savings you can tap in for holiday-related expenses. This might be a separate gift or holiday spending fund, or maybe a general savings account that isn't designated toward emergencies or other financial goals.
• Existing budget: Take a look at your current budget to see if you need to make any trade-offs to have enough for your holiday spending. You'll want to check your budget against your holiday expense checklist–which we'll get into next.
• Cut back on expenses: If you haven't saved as much as you anticipated–it can happen to the best of us–consider scaling back on certain expenses, even for a few months. For instance, put a pause on a gym membership or streaming service subscription you don't use very often. Or cut back on eating out until the holidays roll around. That will net you savings that you can put toward your end-of-year-expenses.

Creating a spending plan that's in sync with your available funds can help you steer clear of overspending.

Make a Holiday Expense Checklist—No Surprises This Year

To get a grasp on exactly what expenses are bound to pop up this year, jot down all your holiday costs–from gifts and travel to treats and twinkling lights. That way, those sneaky expenses won't creep up on you.

Your holiday expense checklist can include:

• Travel to see friends and family
• Festive attire for parties and gatherings
• Gifts (note the giftee, ideas for presents, and the amount you want to spend)
• Cards and gift wrap
• Holiday decorations and lights
• Food costs, if you plan on hosting any gatherings
• Eating out for holiday meetups with friends and coworkers
• Special outings
• Increased utility bills (for holiday light displays)
• Pet sitting or pet boarding fees
• Charity donations

Track Your Holiday Spending Like a Pro

Once you have an idea of what your holiday expenses are and you've set a budget, you'll want to keep track of your holiday spending. Keeping watch on those dollars can keep the joy in the season. Here are a few ways to go about it:

Budgeting app. Use a budgeting app where you can set a monthly spending limit. You can also track expenses you make with linked checking accounts, debit cards or credit cards. For each transaction, you can label it as "holiday expenses" so that you can keep tabs on how much you're doling out to end-of-year costs.

You can usually change the amount allocated to a spending category each month. Some budgeting apps also allow you to "rollover" any unused funds from the month prior. So if you have any funds left over from cutting back on expenses in November, you can put money saved from scaling back. And, you can just make other adjustments as you see fit.

Budgeting apps can also pull data from your transaction history to create visualizations of your spending. You can often look at your spending based on categories and within a given time frame.

Pen and paper. While a budgeting app can make it easy to create a spending plan, categorize your spending and keep track of your cash flow, sometimes you might prefer to keep track of your holiday expenses with a pen and paper. You can create a few columns and label each column the following: expense, amount, and notes.

Spreadsheets. If you enjoy using spreadsheets, this can also help you stay organized and give you a birds'-eye glance at your holiday spending.

Creative Ways to Save and Stretch Your Holiday Budget

Feeling overwhelmed with all the expenses? Not to fret. There are ways you can curb how much you dole out this year.

Set a spending cap. Once you've jotted down all your holiday expenses and how much you anticipate spending in each category, set a spending cap. You'll want to factor in rising costs due to inflation, or additional expenses. For example, maybe you are hosting Thanksgiving this year, or maybe you would like to visit family this year.

Make trade offs. If you haven't saved up as much cash as you would like for the holidays, think about how you can cut back on your living expenses. For instance, commit to eating out less for a few weeks, or do a no-spend challenge, where you don't purchase any non-essential items. Any amount you end up saving you can put straight toward your holiday fund.

Redeem shopping loyalty points and credit card points. Another way to save is to redeem points earned from popular shopping extensions and apps, where you rack up cash-back points and can redeem them for cash or gift cards.

While you can use up shopping loyalty and credit card points toward holiday purchases, note that there are some tradeoffs. For one, shopping platforms like Rakuten collect a lot of data about you, your shopping and browsing habits. That way, they can provide you with deals. Just make sure you're comfortable with that trade-off so you can save money.

Plus, you'll want to be careful not to let a cash-back deal or "low price alert" tempt you to make unnecessary purchases. Along the same lines, you don't want to rack up a high balance on your credit card so you can accumulate points.

Consider using credit card points toward travel-related expenses or gift cards that you can use to gift your friends and family, or put toward holiday-related purchases. Remember: Every dollar saved counts, especially during this spend-y time of year.

DIY gifts. If you have the time and desire, consider homemade gifts. Make things you've been interested in making. . For example, maybe you want to try making homemade sugar scrubs or you're known in your social circle for your delicious chocolate chip cookies. A throwback gift, such as a mixed tape, could add a touch of fun and nostalgia.

Secret Santa. Suggest to your family or friend group that you partake in Secret Santa. Draw a name and purchase a gift for just one person. Make sure a spending cap is set. That way, you have more funds to buy a nicer gift, and have time to carefully choose.

Group gifts. Instead of purchasing individual gifts for each of your relatives, consider a single group gift. For example, tickets to the local zoo or theater could be less expensive overall. Or maybe a themed food basket that's meaningful to that family.

Send a card. A thoughtful, handwritten note or family update and dropped off at the post office can add a bit of cheer to someone's mailbox.

Talk about it. While it might seem awkward, bring up with loved ones the fact that you're on a budget–or maybe you've grown tired of the consumerism that plagues the holidays. In turn, it gives the other person an opportunity to share similar sentiments. Hash out expectations on gift-giving beforehand to quell any anxiety you might have.

Host a potluck. Skip the gathering at a pricey restaurant. Instead, host a festive gathering where everyone contributes a dish or drink to share. You can play board games, carol, watch holiday movies together, or sing karaoke.

Stock up on clearance items after the holidays. After the holidays, you'll likely find deep discounts on gift wrap, decorations, and cards on clearance. If you have room to spare in your budget and home, scoop up some of these deals. Post-holiday markdowns can go up to 75%, sometimes 90% off.

Start Planning Early for Next Year’s Holiday Budget

To avoid last-minute financial stress, start planning and saving for next year's holiday season early. Open a savings account designated just for the holidays. Then, set aside money for the holidays throughout the year.

If you're able to, automate saving $20 a week toward end-of-year expenses. That adds up to $1,040 a year. If you find yourself with excess funds, you can set it aside for the next season.

Enjoy the Holidays Without Financial Stress

It's indeed possible to enjoy a financially stress-free holiday this year. Doing so requires careful planning and budgeting for the holidays, making trade-offs if needed, and exploring different ways to save.

With the right strategies in place, you can partake in the festivities and cheer of the season without worry–and focus on what matters most to you and your loved ones.

Frequently Asked Questions (FAQs)

How much does the average American spend on holiday items?
The amount can change from year to year, but the National Retail Federation (NRF) estimates that in 2024, the average American will spend $902 a year on holiday expenses.

What holiday do people spend the most money on?
People typically spend the most money during Christmas, followed by New Year's Eve, then Valentine's Day.

How much does the average family spend on each child for Christmas?
It depends, but on average, 19% of people plan to spend at least $200 per child for the holidays.

About the author

A personal finance writer for over 8 years, Jackie Lam covers money management, lending, insurance, investing, and banking, and personal stories. An AFC® accredited financial coach, she is passionate about helping freelance creatives design money systems on irregular income, gain greater awareness of their money narratives, and overcome mental and emotional blocks.

Her work has appeared in publications such as Bankrate, Time's NextAdvisor, CNET, Forbes, Salon.com, and BuzzFeed. She is the 2022 recipient of Money Management International's Financial Literacy and Education in Communities (FLEC) Award, and a two-time Plutus Awards nominee for Best Freelancer in Personal Finance Media. She lives in Los Angeles where she spends her free time swimming, drumming, and daydreaming about stickers.

Editorial policy

Our goal at Self is to provide readers with current and unbiased information on credit, financial health, and related topics. This content is based on research and other related articles from trusted sources. All content at Self is written by experienced contributors in the finance industry and reviewed by an accredited person(s).