Do you get an urge to splurge every time you see a glittery gift display? Or feel pressured to keep up with loved ones' expectations?
Spending more than you can afford during the holidays — and putting that spending on a credit card — can leave you paying off that short-lived joy for months.
We asked five personal finance bloggers to share their secrets for celebrating on a budget, their tips for using credit wisely and the lessons they learned from expensive holidays past.
Gifts don't equal love
Stephanie Halligan, blogger at The Empowered Dollar
Halligan admits that, when she got her first “adult paycheck,” she went overboard on holiday spending.
“I felt like I had the money to buy all of my friends and family the fabulous gifts they deserved,” she says.
But after paying off the excess holiday credit charges, she adopted a new strategy.
“I focus on spending time, energy and love during the holidays,” Halligan says. She does save $50 a month year-round for her holiday fund, but still tries to create homemade gifts to stretch those dollars even further. “That way I have more to give,” she says.
Halligan uses credit cards for everyday spending, and she doesn't change that pattern for the holidays. It's easier to control impulse spending if you shop with a list, create a budget before you hit the stores and avoid buying gifts for yourself while shopping for others, she says.
“I really only live by one rule for holiday spending: Dollar signs don't equal love,” Halligan says. “It truly is the thought that counts, so don't get caught up in spending a lot to show your love.”
A better balance for buying
Laurie, blogger at The Frugal Farmer
In past years, Laurie tried to spend the same amount on presents for each of her four children. The trouble was, she had no limit on what that amount would be.
“If I found something that I thought one kid would want, I'd go find more presents for the other three to make the spending equal,” she says. “The word 'budget' was not in my vocabulary.”
When she realized that all of her family's spending was out of control, Laurie decided to begin a financial transformation by reining in holiday spending.
“It was a small, one-time-a-year budget, and I figured I could handle that,” she said.
Her new approach includes budgeting a set amount for each person on her gift list, including her kids. She also recommends making a list of everyone you'll be buying for, remembering to add “extras” like teachers and day care providers. Having to pick up last-minute gifts can blow the holiday budget.
“We resist the urge to splurge by reminding ourselves that we are doing our family a favor in the long run by keeping spending under control now,” she says.
Laurie primarily uses cash but will bring out the credit cards if she knows she has enough cash to pay off the debt. The trick is to understand that charges represent real money.
“It's real easy to push those credit card dollars to the back of your mind and convince yourself that you'll deal with it later,” she says. “Then later comes, and you've found that you've spent yourself into a hole.”
Wrap it up early
Marissa Ansar, blogger at Thirty Six Months
Self-described “reformed shopaholic/funaholic” Marissa Ansar not only saves year-round for the holidays — she shops for gifts all year as well.
“I have a running list of things that I want to buy, so if things are on sale in March that I think someone will like in December I'll pick them up and they'll go in my gift drawer,” she says. “The end-of-season sales are by far the best thing for staying within budget or actually under budget.”
That approach helps Ansar avoid “frantic shopping” in December. She finished her shopping for 2013 in August.
Ansar says she steers clear of the mall when looking for part-time jobs around holiday time since she's been known to spend all of her holiday paychecks on holiday-themed stuff that she didn't really want or need.” She uses her credit card strategically, shopping at merchants who offer bonus points or making purchases when her credit card offers bonus rewards.
Ansar also purposely keeps her gift list small; with her closest friends, for example, she holds a “Secret Santa” exchange.
“I'd rather buy a $200 to $300 gift for one person that I know they'll love instead of buying 10 people $20 gifts that I know they'll throw away,” she says.
Celebrate debt free
David Bakke, editor at Money Crashers Personal Finance
Trying to outdo other family members by impressing them with expensive presents used to leave Bakke with a load of credit card debt each January. So after last year's holidays he resolved to take a different approach — regularly putting aside a small amount of money throughout the year for holiday shopping.
“Now I have close to $500 to spend each year before I even start my gift buying,” he says.
Instead of worrying about what others are spending, Bakke says he looks for a modest gift that each recipient will need and use. To trim spending even more, he shops at dollar stores for miscellaneous holiday items such as wrapping paper and decorations. He recommends writing out a complete holiday budget — including costs for gifts, entertainment, supplies and food — and sticking to it.
Although it was credit card debt that originally had him rethinking his approach to gift-giving, Bakke still uses cards to earn cash-back rewards.
“It's all about willpower in my opinion, and that goes for cash and credit card purchases,” Bakke says. “I'm now much more disciplined as far as keeping my holiday spending in check.”
And if you can't exercise that control?
“Make all purchases in cash,” he advises.
Remember that saving doesn't make you a Scrooge
Holly Johnson, blogger at Club Thrifty
Johnson and her husband used to buy gifts for their siblings, their siblings' spouses and their nephews and nieces every December. But it got to the point that the adults were just buying gift cards for each other and trading them around.
“When we started working on our finances, we realized that we didn't want to buy for all those people anymore,” Johnson says. Fortunately, the siblings all arrived at the same conclusion around the same time. Now, the gift exchanges are limited to the kids in the family. Johnson gives her nieces and nephews $20 each, since they prefer to buy their own presents anyway.
Johnson also takes the thrifty approach with her own small children, buying them used things for holidays and birthdays since they don't know the difference between new and previously owned.
“Don't try to keep up with the Joneses,” she advises. “Your neighbors might buy really expensive gifts, but they also might be making payments on them forever. Just buy what you can afford.”