Factoring holiday expenses into your budget all year long is effective for avoiding debt, but it's not always feasible with a limited budget or unforeseen expenses.
When that's the case, lacking a strategy for holiday spending can leave you vulnerable to debt and overspending that delays financial goals. But it's not too late to come up with a last-minute plan to save money for the holidays.
The small end-of-the-year window can offer some time to make money moves that help prevent a holiday debt hangover.
1. ALIGN YOUR HOLIDAY BUDGET WITH FINANCIAL GOALS
When determining how much to spend over the holidays, begin with your budget, suggests Jason Speciner, a certified financial planner at the firm Financial Planning Fort Collins.
"Start with how much money you're willing to spend -- and able to spend -- on gift giving and then work your list into that," he says. "Don't put the cart before the horse and end up overspending because you've, you know, put dozens of people on your gift list," he says.
If your debt or budget leaves no room for holiday expenses, plan to spend time with people through free holiday activities, make gifts or save with a secret gift exchange. Set expectations early by alerting people to your plans.
Adding to the debt pile during the holidays gets expensive and takes longer to pay off. Strategize how you'll pay off any debt and prioritize high-interest debt first. With good credit (a FICO score of 690 or higher), a balance transfer credit card lets you move debt from a high-interest credit card to one with a lower interest rate, possibly a 0% intro APR. There's typically a fee of 3% to 5% assessed for each amount transferred. Without interest, your monthly payments are applied directly to your balance, reducing the time it takes to pay off debt. With less-than-ideal credit, a debt management plan through an accredited nonprofit credit counseling agency may offer relief if you're struggling to make progress.
2. USE THE BONUS-FRIENDLY SEASON
If you're debt-free and planning to get a new credit card, look for one with a sign-up bonus that can offer additional cash or rewards to defray holiday expenses. Sign-up bonuses usually offer a three-month window to meet spending requirements, and they can be easier to reach if you're charging everyday and holiday expenses. A card with a 0% APR on purchases can also save money on interest for some time.
3. EARN REWARDS WITH CASH-BACK APPS
A cash-back app can earn additional value on everyday purchases. It may require uploading receipts, but for Krystal Sharp, coupon coach and creator of the blog Krys the Maximizer, it's worth the effort. She uses Ibotta, Fetch Rewards and other apps to earn cash back or gift cards. These apps let you add offers in-store or online from certain retailers and earn cash back on eligible items purchased. Or you can upload a receipt to redeem certain offers. You may also earn incentives for referring other people. For more value, Sharp uses a rewards credit card to make purchases and stack earnings.
"I'm trying to focus a lot on how can I earn gift cards, how can I get referrals, how can I save enough at the store and use my store rewards to buy things we need for the holidays," she says.
Depending on how much you spend, it's possible to make $20 to $25 in a week or two with everyday purchases, and that's typically enough to cash out, according to Sharp. The earnings add up over time.
4. SAVE WITH A 'NO-SPEND CHALLENGE'
A foolproof way to save is to refrain from making unnecessary purchases over a certain period of time. You can try a no-spend month, no-spend weeks or no-spend weekends, depending on your preference. The money saved can offset potential costs during the holidays.
For Courtney Clarke, a New York-based content creator at TheLifeOfCo YouTube channel, a "no-spend November" helped her stay on track with her debt goals in 2020. For a month, she spent only on essentials, avoiding eating out and activities that cost money.
"I definitely can't say that I was perfect in the matter, but it's just a nice reset to retrain your brain," says Clarke. "It's just making sure that you're attempting to get the best out of it."
She admits spending on eating out when there wasn't enough time to prepare a meal, but even after straying occasionally she still saved over $300 that month.
5. GET A SIDE HUSTLE
Earn money toward the holidays by picking up a side job now or decluttering your home. When it comes to gig work, there are many flexible side jobs to do in your spare time from ridesharing to making deliveries. Or if you prefer to save time, sell those dust-gathering items in your closet to consignment stores.
"I sold a ton of stuff to Plato's Closet and Once Upon a Child to get rid of it," says Sharp. She estimates that she averages about $50 per trip or $200 to $300 per year.