Keep to a Christmas Budget and Avoid Holiday Debt

The Christmas season is officially upon us. According to the National Retail Federation, the average American consumer spends about $940 on Christmas shopping each year. That’s a lot of Barbies, Legos, ugly sweaters – and a lot of money, especially if you feel like buying gifts not just for your kids, parents, and siblings but also colleagues, hairdressers, postal workers, school teachers, and everyone in between. One question we ALWAYS get is: how do we keep ourselves out of holiday debt?

If you’ve seen our articles on financial planning in all its forms, you can probably guess that we’re going to advise you to map out your holiday spending in advance. This is the easiest way to stay out of debt and start strong in January, but we also know this simple principle isn’t always easy to put into practice. As our holiday gift to you, we wrapped up these 6 debt-stopping tips to make Christmas shopping on a budget a workable strategy. Nobody loves a maxed-out credit card – what may surprise you, though, is that following a Christmas budget can cause a lot of the traditional holiday stress to evaporate.

1.    Make a List of All Your Gift Recipients

One of the keys to successful Christmas shopping on a budget is to avoid last-minute impulse purchases. In order to do that, start by writing down the names of all the people and charities you want to buy for or donate to. It’s best to not rush this process: give yourself an entire weekend to finish the list as things occur to you, and start as soon as you start hearing Jingle Bells in your local mall. Even Santa “makes a list and checks it twice”, so don’t be concerned that making a Christmas budget is somehow contrary to the holiday spirit.

2.    Prioritize Your Friends and Family

Now that you have a list on which to base your Christmas gift budget, you need to start putting a number on your holiday spending. If this is lower than your available savings (not your emergency fund!), you’re sure to stay out of debt as long as you stick to the plan.

One way of doing this is to divide your list of people you’d like to give gifts to into categories A, B, or C. Category A is for close family and friends. Category B consists of “not so close” family and friends. Category C are people who you would like to give a nice thank you gesture to like: your hairdresser, teachers, and dog groomer.

Making these distinctions may be tough in some cases, but this system is great for Christmas shopping on a budget. Simply assign each category a dollar limit, divide it up, and stick to it. If you’re married, make sure you and your spouse both give input to the lists and be realistic with how many people you can afford to have in each category. You can also start thinking about which kinds of gifts each individual will appreciate most.

3.    Enlist Your Kids’ Help in Planning Christmas Shopping

If you’re not only married but also have a few little bundles of joy sprinting around, corral them for a few minutes and see what ideas they have about Christmas shopping. There’s a good chance that they know some of the people in each of the categories we decided on in the previous step, and they’re often able to surprise you with their creativity and thoughtfulness. Letting the children make some decisions on your holiday spending can change the entire tone of the gift-giving experience. Just as importantly, this is a great opportunity to teach little ones that, most of the time, it really is better to give than to receive.

4.    Consider the Receiver’s Spending Habits

We talk a lot about Money Personalities here on The Money Couple. Part of the reason why is that we’ve found that understanding your spouse’s money personality leads to a much more harmonious marriage. This certainly applies to other kinds of relationships as well, though, and in particular when it comes to matching the right kinds of gifts to different people.

Let’s say you are giving a gift to a person who really likes to save money. Don’t get them an extravagant gift, choose something simple for them, or tell them that you bought it on sale … with a coupon! Trust us, they will enjoy the gift even more. On the other hand, if you know the person receiving the gift prefers extravagance or brand names you can go all out.

Thinking in terms of Money Personalities really does help with effective Christmas shopping on a budget. Don’t forget about other aspects of each person’s interests and inclinations, though. The chances that your 5-year-old niece will enjoy a socket wrench set, for example, are not good.

5.    Get Creative with Your Holiday Spending

The people on the “C” list are the perfect group when it comes to thinking of unusual gifts. What about a nice plate of cookies, or a small gift certificate, or maybe even a nice homemade card with a thoughtful message? Offering favors is often the best way to honor and serve the people in your life: if your neighbor has trouble getting around, letting them know you’re happy to mow their lawn at the same time as yours will mean the world to them.

Remember, with this category as well as the “A” and “B” categories…it’s the thought that counts. Often time we think: “the more expensive the better”, but remember it’s the caring gestures that come shining through. You definitely know people in your life who appreciate the thought behind the gift more than the price tag.

6.    Stay Focused on Staying Out of Debt

We realize you are shopping, not preparing for the Olympic decathlon, but this is a good time to keep your eyes on the prize. You’re going to be surrounded by advertisements and other influences telling you that gift’s worth is really just how much you spend on it. Don’t fall for this: smart holiday spending doesn’t have to mean maxing out your credit cards.

One useful trick is to avoid shopping for holiday gifts at the same time as ordinary household items.  It is too easy to convince yourself that you “need” an item because you are in a giving mood. You could, for instance, do all your Christmas shopping online and get your groceries at the supermarket. This saves you time as well as wear and tear no your nerves during the busiest retail season of the year. Many online retailers offer free shipping and free gift notes. You’ll also find new ideas as you browse, making this a fun activity to do with your spouse so you can really enjoy the whole process of gift-giving. Just be sure to order early enough so your packages arrive on time with plenty of time to wrap or ship to their next destination.

Final Thoughts

We hear about so much arguing and stress that goes with gift-giving. Please, please, please communicate well with your spouse about what you are going to spend together this Christmas season. And remember your relationships are far more valuable than any material gift you could ever purchase.

We would love to hear any other suggestions you have to stay out of debt this Christmas – just comment below!

Make this a wonderful, debt-free, fight-free Christmas Season this year. Ho ho ho and merry Christmas!

Taylor & Megan Kovar

The Money Couple

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