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How to Avoid Holiday Debt

Last year Americans spent an estimated $750 on holiday gifts—and many ended up paying the price well into the new year. But don't say "Bah, humbug!" just yet. We'll show you how to get in the spirit without going broke.
Even Santa Needs a Budget
How to Avoid Holiday Debt
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Saverio Truglia

Before you start spending, do a little math and figure out how much you can afford, says Bill Losey, a certified financial planner based in Wilton, New York. Keep it simple: Take any money you've been saving for the holidays and add it to your discretionary cash (the dough you don't need to live on). Divvy up that budget among all expenses. If you don't know where to start, look back at how you allocated your money last year. While there's no rule for budgeting in general, if you splurge in one area, cut back in another. For example, hosting a lavish dinner means you'll probably need to dial down on, say, gift giving. And don't make the common mistake of forgetting to account for all expenses, including holiday cards, stamps and end-of-year gratuities.

Finally, if you need help sticking to your plan, use a smartphone app, such as Gift List Budget Shopper (iPhone, $1.99) or the Christmas Gift List Planner (Android, free). For extra motivation, check out Bankrate.com's credit card payoff calculator to see how long it will take to reach a zero balance.

Present Value

Don't begin browsing until you've written down who you're shopping for and how much you want to spend on each of them. Remember, it doesn't have to be divided up equally, says Anna Post, an etiquette expert with the Emily Post Institute. Nor do you need to match other family members' price tags. Consider asking everyone to set a price limit, says Losey. Even better, agree to buy only for the kids and organize a gift exchange, such as a Secret Santa, for the adults (Elfster.com can help). Stretch funds even further by buying presents with unused gift cards, airline miles (through an airline shopping portal) or points from another rewards program.

It's the Thought That Counts

Stash your credit card and give your time, suggests Sean Meshorer, author of The Bliss Experiment (Atria Books). The tech-savvy set can create an online photo montage, amateur chefs might cater a special meal, or you could invite your sister's kids for a sleepover (offering the priceless present of an evening out). Since the holidays are about being together, make them extra meaningful by organizing a family volunteer project, such as working at a local soup kitchen. "The experience will be far more memorable and valuable than any gift could be," says Meshorer.

Tipping

Don't forget to show appreciation for the folks who help year-round. Gratuities are always welcome, but it's perfectly acceptable to hand out small, inexpensive gifts, such as home-baked goods. For people you tip at each visit—like your hairstylist—a thank-you note is sufficient, according to the Emily Post Institute.

Originally published in the December 2012 issue of Family Circle magazine.