962. Laura reviews strategies to reduce or avoid debt during the last quarter of the year and still have a bright holiday season.
962. Laura reviews strategies to reduce or avoid debt during the last quarter of the year and still have a bright holiday season.
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Welcome back to episode 962 of Money Girl–I appreciate you downloading the show! I'm Laura Adams, an award-winning author, on-camera spokesperson, female money speaker, and founder of The Money Stack, my Substack newsletter. Subscribers automatically receive my Money Success Toolkit, which includes the exact templates I use to manage my finances.
You can learn more, ask questions, and sign up for the Money Stack at LauraDAdams.com. Or leave a voice message with your question or comment by calling 302-364-0308. I'd love to feature your question on Finance Friday, our weekly Q&A, bonus edition of the show!
Now that we’re in the final quarter of the year, it’s time to start thinking about the holidays. No matter what you do or don’t celebrate, the holidays are supposed to be filled with joy and anticipation for the New Year. But they can also wreak havoc on your finances if you’re not careful.
Americans spent a record $994 billion on holiday retail sales in November and December 2024. According to the National Retail Federation, this breaks down to an average of approximately $902 per person on holiday-related items, including gifts, food, and decorations.
Unfortunately, the debt Americans took out to finance their holiday purchases in 2024 averaged $1,181 per person. It’s all too easy to get swept up in consumerism and overspend this time of year.
This post will review strategies to avoid a holiday debt hangover as you ring in the New Year. Some tips and upfront planning can help you reduce or avoid debt during the last quarter of the year and still have a bright holiday season.
9 strategies to avoid holiday debt
Consider the following nine strategies to reduce or avoid debt altogether during the holidays.
1. Have a giving plan.
As early in the season as possible, start thinking about every person you’d like to give a gift to. Jot down family, friends, neighbors, co-workers, teachers, service professionals, and anyone else you want to remember. Then, estimate a gift amount for each one, even if you have no idea what to give them yet.
Next, list every non-gift holiday expense you can think of, such as travel, party food, wrapping paper, tape, ribbon, cards, postage, decorations, or new clothes, and the estimated costs. Add up the grand total and see how it fits into your budget.
If you still haven’t paid off last year’s holiday debt, you definitely overspent, so be sure not to repeat that mistake again! If your estimated holiday spending exceeds your budget, consider deleting items, reducing the estimated gift amounts, or shortening your gift list.
Next, put the list in order of importance. For instance, you’d probably rank a gift for your mom higher than for your child’s piano teacher. Buy the most important gifts first, so you aren’t tempted to overspend on the rest. Plus, the sooner you buy more expensive items, the more likely you are to find sales or discounts to cut their cost.
2. Shop strategically.
Putting off holiday shopping until the last minute is a surefire way to overpay, get stressed, and feel like you've missed the mark when it comes to giving gifts. Therefore, start early and have the giving plan that I just mentioned readily available.
If you have a plan, you’ll know the maximum to spend on each person and yourself during the holidays to stay within your budget. Otherwise, you risk going off the rails with loads of distractions and spending temptations.
While shopping locally is always appreciated by small businesses, and can be fun and rewarding, be aware of the downsides. For instance, you could spend more than you anticipate compared to shopping online.
Consider researching prices online and taking notes to find the best deal, whether in local or online stores. Many online retailers offer free shipping and nice discounts, especially on Black Friday, the day after Thanksgiving, and the following Monday, known as Cyber Monday.
To make the most of online purchases, start with a rewards site like Rakuten, where you earn points or get cash back at thousands of well-known stores. It’s free to sign up, and Rakuten automatically sends rewards to the account you choose.
Another tip is to use a rewards credit card to purchase holiday items, allowing you to rack up cash back or rewards points. However, if you can’t pay off your balance in full, this isn’t wise because rewards cards typically charge high interest. If you must take time to pay off your balance, choose a low-interest card instead.
Ideally, you’ll have a game plan to maximize card rewards and minimize debt. But if you have a tendency to be a little too jolly with your credit cards, consider spending your holiday gift budget in cash. That will save you from a nasty debt hangover in the New Year.
RELATED: Conquer debt–how non-profit credit counseling works
3. Skip new retail cards.
Another downside of shopping on Main Street or in a mall is that store clerks are often trained to promote sign-ups for their retail credit cards. Unless you actually need a card or frequently shop at the store and could take advantage of rewards, don’t be tempted.
Getting a discount, such as 10% off, for signing up for a new retail card may sound great, but it results in a hard inquiry on your credit reports, which dings your scores. Additionally, retail store cards often charge high interest rates, making it very costly to carry a balance. So, unless you genuinely want a new card and are committed to paying it off in full each month, stay away from retail cards during any holiday shopping sprees.
ALSO LISTEN: How to pay off credit cards when money is tight
4. Shop secondhand.
You can find incredible, like-new items in local and online secondhand stores for a fraction of the retail price. Depending on what you’re looking for, consider shopping on:
5. Avoid self-gifting.
If you’re like me and tend to buy yourself a few gifts while you’re holiday shopping for other people, stay away from your favorite stores. For instance, if you’re a gadget junkie, avoid going into electronics stores. Also, when you’re shopping online, stay focused and don’t get sidetracked by sale items for yourself.
6. Get crafty.
To cut holiday costs, consider making batches of gifts that are both economical and heartfelt. Edible gifts are always a winner, such as cookies, snack mix, infused olive oil, hot cocoa mix, spiced pecans, or other candied nuts, packaged in festive bags or tins. If you enjoy working with your hands, you can create personalized gifts, such as tree ornaments, simple decorations, or photo albums.
Also, get creative with your gift wrapping. For instance, you could use old maps, reusable fabric bags, and handmade pom-poms instead of expensive wrapping paper, ribbons, and bows. The best time of year to buy wrapping supplies is after the holiday season, when prices are typically heavily discounted.
7. Adjust your traditions.
Though the holidays are steeped with tradition in some families, there’s nothing wrong with changing them to make your holiday less expensive and still festive with one of the following ideas:
Discuss with your family and friends what you hope to achieve during the holidays. Don't be afraid to break tradition and try something new to save money and give you a more peaceful holiday season.
8. Remember your goals.
The holidays are the perfect time to remember your values and financial goals. Perhaps you want to retire in 20 years, pay for a child’s education within the next 10 years, or be free of credit card debt within the next five.
Being in the holiday season is no excuse to stop saving and investing. The end of the year is the perfect time to adjust your 401(k) contributions to ensure you put in as much as possible, up to the allowable annual limits.
If you get a year-end bonus, you might elect to save a larger amount of it for retirement and increase your total contributions for the year. Also, consider increasing your savings rate for the New Year. For instance, if you’re currently saving 3% of your gross income, make a commitment to save 4% next year.
ALSO LISTEN: How can I become a confident investor?
9. Practice gratitude.
Being grateful for what we have helps us focus on what’s really important, and in turn, can nurture good financial habits. Consider starting or ending each day during the holidays with a moment of gratitude. That can keep you focused and in a good state of mind all year long, but especially during the often hectic holiday season.
That's all for now. I'll talk to you soon. Until then, here's to living a richer life!
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