By many measures, last year was a record-spending holiday season, and 1 in 3 Americans said they overspent during the 2021 gift-giving period. For most shoppers, increasing their spending meant relying more on credit cards or buy now, pay later financing like Afterpay to spread out their expenses.
With inflation still running rampant, stubbornly high price tags have the potential to squeeze consumer’s wallets even tighter this year. That is, if they are not prepared.
For those who are looking to save on holiday shopping in 2022, here are some steps you can take to prevent overspending.
Related: 6 Money-Saving Tips to Fight Inflation
1. Create a Budget You Can Afford
Start by setting a holiday-specific budget to help you prioritize your spending. Knowing the end you have in mind allows you to implement the right number of cost saving measures. Here are some common holiday spending categories you should consider when creating a spending limit:
- Gifts
- Holiday travel
- Food and entertainment
- Holiday decor and attire
- Charitable donations and tips
Not all categories may be applicable to you – let your circumstances and priorities guide your budget.
Related: How to Create a Monthly Budget
2. Create a Shopping List
Once your budget is set, plan what items you need to purchase in each category. For example, in the gifts category, pre-determine who you’re gifting to and what gift(s) you plan to purchase for each individual. Repeat this process for the remaining holiday spending categories.
Pre-planning your shopping list will not only help you stay within the allotted budget, but it will also lessen the temptation of impulsive purchases.
Pro Tip: If you don’t know someone well enough to know what’s on their holiday list, is it really worth it to buy them a gift? Consider writing them a handwritten note instead.
3. Become a Coupon and Coupon Code Collector
Now that you’ve created a shopping list of the items you need, it’s time to bargain hunt. Look for coupons/coupon codes, sales and value sets. But remember: Stick to your budget and to your shopping list – don’t make an impulse purchase just because it’s a good deal.
Pro Tips:
- Shop on/around major sale dates, such as Black Friday and Cyber Monday
- Set price alerts for specific products on your shopping list (Like CamelCamelCamel or Keepa)
- When shopping online, use a browser extension for additional online savings (Like Honey)
- “Reward stack” by combining rewards apps and credit cards
4. Get Crafty When Possible
Not only can homemade gifts save you money during the holiday season, but they can also feel much more personal to the recipient than a similar item purchased in store.
DIY gifts can include knit items (mittens, hats, scarves), embroidered items (pillows, coasters, kitchen towels), crocheted items (tote bags, blankets, stuffed animals), handmade candles, handmade ornaments, photo collages… the list goes on and on!
Pro Tip: Give yourself enough time to purchase the materials or ingredients needed for these DIY projects, as well as the time that’s required to complete the project.
5. Be Careful Spending on Credit Cards
If used responsibly, using a credit card for holiday purchases can be a helpful financial tool. Not only will you rack in the benefits associated with your card (cash back, points, airline miles), but credit cards are typically well-protected in the event of a loss or theft.
Just make sure you’re using the card as a temporary cash flow tool, and that the balances can be paid off in full before the next month. Otherwise, credit card interest payments can quickly outweigh the card’s benefits (and your credit score could suffer).
Careful planning and honest conversations can help reduce the cost of the holidays, keeping them from ruining you – or your family’s – finances. Keep these tips in mind as you navigate the most wonderful time of the year. Happy holidays!
Bautis Financial Advisor Commentary: December 7, 2022