As inflation and interest rates rise, American adults will rack up around $1500 in debt this holiday season.
According to a 2022 LendingTree survey, 30-35% of adults in the United States go into thousands of dollars in debt during the holidays. And this year, experts project that holiday spending on gifts, decorations, food, and travel will break new records.
The National Retail Federation expects U.S. consumers will spend between $957.3 billion and $966.6 billion throughout the 2023 holidays, a 3-4% increase since 2022. Similarly, a NerdWallet 2023 Holiday Travel Report predicts American holiday travelers will spend $254 billion on flights or hotels between November 2023 and January 2024.
Financial and money-management experts offer practical solutions for keeping seasonal expenses at a minimum and staying ahead of holiday debt.
Save Money for the Holidays & Avoid Debt
There are many low-effort ways for American consumers to save on holiday spending.
Make a List of Gift Recipients in Advance
Get a head start on saving for the holidays by making a list of gift recipients in advance. CNBC suggests consumers write down everyone they plan to shop for to get a clear overview of how many gifts they’ll need. Buying random gifts without a plan can lead to unconscious overspending, so putting together a clear, concise list before shopping can help save money.
Set a Budget (And Stick To It)
Financial professionals recommend setting and adhering to a strict budget for holiday expenses, whether shopping for gifts or booking travel. “Set a budget and pay for your gifts with cash,” says Christopher Alarcon of Financially Well Off. “This way, you won’t accrue debt and force yourself not to buy gifts falling outside your budget.”
Establishing a budget for holiday spending in advance also allows consumers to save money before the season begins. Setting up a holiday fund for gifts, entertainment, and travel is a helpful way to prevent excessive spending and debt accrual.
Seek Affordable Alternatives To Trendy Items
Instead of purchasing expensive, trending holiday items, look for budget-friendly alternatives. According to Rolling Stone, one of the top gift items for the 2023 holiday season is Stanley’s Quencher H2.0 Flowstate Tumbler. This tumbler went viral on social media for its functional travel features, like an ergonomic handle and cupholder-compatible design.
Genuine Stanley tumblers cost over $40, but there are options for Stanley alternatives with a similar aesthetic and functionality for a fraction of the price. Many retailers offer practical but more affordable lookalikes for the season’s hottest name-brand gifts.
Contribute to a Group Gift
One practical way to save money on large gifts is by purchasing them with a group. Splitting the cost of an expensive tech accessory or furniture piece among several people lessens the financial burden on one person. This is an excellent option for those wanting a specific but costly item, as it allows more people to contribute to the gift-giving.
“My sister has been dying for an outdoor egg chair to complete her patio, but she hasn’t bought one yet since they’re so expensive,” says Elise Armitage of What the Fab. “I plan to split the cost of an egg chair with friends and family to finally get her one this Christmas.”
Host Gift Exchange Parties
A Secret Santa gift exchange is a fun and budget-friendly holiday activity for company parties and family get-togethers. “Suggest a group gift exchange instead of giving each person an individual gift,” says Robyn with A Dime Saved.
Ask everyone who attends to bring a small gift for their recipient and set a reasonable spending limit of about $25 per item. “This way, you can reserve time and money for one great gift instead of spending a lot on many different gifts,” Robyn explains.
Avoid Shopping at Name-Brand Retailers
Research options for more budget-friendly retailers rather than shopping at upscale name-brand stores. For example, you may have someone on your list who loves the aesthetic of Anthropologie. While this store is a popular place to shop for the holidays, its high prices are out of budget for many consumers.
To save money without compromising quality, seek out stores like Anthropologie that offer a similar aesthetic, but at a more affordable price point. With so many alternative retailers around, gift recipients will likely never know their presents were purchased at a non-luxury store.
Opt for Homemade or Repurposed Gifts
Those eager to tackle a DIY project can opt for homemade or repurposed gifts this holiday season. Handmade gifts are a heartfelt and sentimental way to celebrate the holidays on a budget. There are many easy options for DIY holiday gifts — from food to home decor — that will have a meaningful impact.
Homemade baked goods, snack mixes, and hot chocolate kits are affordable gifts everyone will love. For a fun arts and crafts project, make ornaments or tabletop accessories using materials like twine, yarn, and fabric.
Repurposing items already on hand or shopping for gifts at thrift stores and flea markets can also save money. Transforming old photos, maps, ticket stubs, and clothing items into new art or home decor pieces is good for the wallet and the environment.
Celebrate at Home
Celebrating the holidays at home can help Americans save hundreds to thousands of dollars on travel expenses. In a U.S. survey of over 2,000 adults, NerdWallet found that 50% plan to travel for the holidays. These consumers will spend an average of $1,947 on flights or hotels during the holiday season.
Staying home for the holidays can help Americans avoid taking on debt to pay for travel. 75% of 2023 holiday travelers in the U.S. intend to use credit cards for travel-related expenses. Most American consumers are willing to charge holiday travel to credit cards, even if it means carrying a monthly balance.
Credit card users who charged their holiday travel expenses in 2022 took an average of 2.5 months to pay off balances. The financial burden of paying for holiday travel with credit cards can quickly increase as interest rates reach record-high levels.
Take Advantage of Cashback Rewards and Travel Perks
Browsing gifts and booking travel online can help your money go further with innovative websites and services. “I shop online using cashback sites,” explains Jon Dulin, founder of Money Smart Guides. “Rakuten often offers higher rates at various stores, allowing me to earn 5-15% on my purchase.”
Credit card rewards can help consumers save on holiday-related gifts, entertainment, and travel expenses if managed responsibly. Some credit cards encourage seasonal spending with cashback incentives, so browsing different options is crucial.
“I shop using my Discover card,” Jon says. “For the fourth quarter, Discover offers 5% cashback at Amazon and either Walmart or Target sites. I usually shop through Rakuten and pay with this card to double dip.”
Many credit card companies offer travel incentives such as cashback, hotel points, or airline miles. The holidays are some of the best times to spend rewards accrued throughout the year on flight and hotel costs. Cards with travel perks like free trip insurance and waived foreign transaction fees are also beneficial for holiday travelers.