Tips To Help You Manage Holiday Debt

As joyful as the holidays are, they can also be full of stress—and debt. If you tend to overspend this time of year, you’re not alone. Holiday debt is common but preventable. Next year, try some strategies to help you manage holiday spending. If you do find yourself in the red come January, we’ve got some tips for that, too. Because celebrating smart always makes the holidays happier.

How much holiday debt is normal?

In 2021, about 36% of Americans took on holiday debt, according to a survey by Lending Tree.¹ The average amount of holiday debt was about $1,250 including gifts, travel costs and party supplies. Most consumers used credit cards, while some used financing services for these out-of-budget expenses.¹

How can I avoid getting into holiday debt?

Getting ahead of holiday debt starts with putting pen to paper. If you start the season with specific dollar limits in mind, you’ll be less likely to overspend. Then you can strategize and make choices that get you closer to your goals. Make a holiday budget

1. Make a holiday budget

Before the holiday season is in full swing, sit down and make a budget. This can give you a chance to identify all possible costs, cut expenses and crush holiday debt. Some helpful steps include:

• Create a list of holiday expenses. Itemizing your expenses is the best way to avoid surprise holiday costs. In addition to gifts and food, think about travel, shipping and postage for presents, social events and charitable giving.
• Set a spending limit. Determine how much you can afford to spend without using credit cards or touching your savings. Having this set number in mind can be very helpful when making purchasing decisions.
• Assign money to different categories. Once your list and spending limit are set, narrow down your spending even further, such as: $200 for family gifts, $50 for work gifts, $50 for donations, etc.

2. Brainstorm how to cut expenses

You can create extra money for holiday spending by cutting expenses in other areas of your life. For example, try the trendy no-spend challenge where you eliminate non-essential spending for a week or a month. Or you could cut back on holiday expenses themselves. If you’re creative, try saving money on presents by giving homemade gifts. Or suggest the whole family take it easy on gifts by doing Secret Santa or buying for immediate family only.

3. Shop smart—online and in-store

Black Friday, Small Business Saturday and Cyber Monday offer great deals, but there’s more to shopping smart during the holiday season. Here’s a list of simple ways to save money and avoid holiday debt:

• Shop early
• Track prices and comparison shop
• Check for in-store and online coupons
• Look for interest-free layaway plans
• Use shopping apps from your favorite retailers
• Protect your privacy and pocketbook with these Simple Tips to Help You be a Smarter Online Shopper
• If a group gift makes sense for a certain situation, ask family, friends or coworkers if they'd like to pitch in for a higher-priced item

4. Reconsider holiday travel

Prices are on the rise for car and air travel alike, so consider skipping long trips and staying closer to home. If that’s not an option, make your flight, car and hotel reservations sooner rather than later. Prices will likely continue to rise. If you can reduce these major holiday expenses, you’ll have a good shot at sticking to your budget and avoiding holiday debt.

A great way to save on holiday plane tickets is to fly on less popular travel days. According to Expedia, the cheapest days to fly are Christmas Eve and Christmas Day, as well as the Monday and Tuesday of the week before Christmas. If you’re renting a car, try to rent from a location outside of the airport for better rates.2 Read more about how to save on holiday travel.

5. Track your expenses

If you’re constantly checking in with your budget, you’re less likely to overspend. One way to avoid holiday debt is to pay with cash. If you have a budget in place for gifts and like to shop in person, try withdrawing your entire budget in cash. Then you’ll know exactly how much money you have available to spend. If you want to keep track of both cash and credit expenses, try apps like Mint, Goodbudget and YNAB.

How do I get out of holiday debt?

If you find that you’ve gotten carried away with the spirit of the season, managing holiday debt is better than ignoring it. The sooner you can put together a plan for how to pay off holiday debt, the better. Consider these strategies for getting out of holiday debt.

• Establish new spending routines. January is a great time to re-evaluate your habits. In the midst of resolution mania, try to incorporate healthy financial habits into your routines and eliminate bad ones.
• Pay more than the minimum. Particularly when dealing with credit card debt, sticking to the minimum payment isn’t the way to crush holiday debt. Even small additional payments can play a big role in getting you closer to your goal.
• Put away your cards. There may be no need to cut up your credit cards. Just take them out of your wallet and set them aside so you aren’t tempted to use them. Extra charges on top of your current debt can put you seriously behind.
• Consider debt consolidation. Depending on the extent of your other debt, consolidation could be a good move. If you have significant credit card debt, for instance, a personal loan to pay them all off could help you spend less over time.

Make merry by making a plan

With all the excitement around the holidays, it can be easy to lose track of how much you’re spending. Give yourself the gift of a solid payment plan that will help you enjoy a responsible, but still super fun, holiday season.

1. "More Americans took on holiday debt this season, owing an average ...." 29 Dec. 2021, https://www.cnbc.com/2021/12/29/more-americans-took-on-holiday-debt-this-year-owing-an-average-1249.html. Accessed 21 Nov. 2022. 2. "Holiday travel prices are climbing high. Here's how to save money.." 26 Oct. 2022, https://www.washingtonpost.com/travel/tips/2022-holiday-travel-prices/. Accessed 21 Nov. 2022.

This article has been updated from previous postings on Nov. 18, 2016, Nov. 14, 2019, and November 16 2020. Matt Diehl and Kim Gallagher contributed to this article.