Small changes now can add up to be a big gift to your bank account come holiday season.

By Karla Walsh
July 30, 2020
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About one in four Americans, 27%, guessed they would go into debt leading up to last holiday season, according to a 2019 Credit Karma survey, and 42% of those individuals expected to rack up at least $500 in debt. Rather than taking out a loan or charging up expenses on a credit card you can’t pay back (two of the most common ways to cover holiday expenses when you don’t have enough cash), the financial pros we spoke to recommend a long-term approach. This way, you can start adjusting your spending and saving up now, months in advance, to cover the estimated $1,500 you’ll spend on gifts, food, entertainment, and travel expenses.

This is especially vital for 2020, in light of the coronavirus pandemic when more Americans are dealing with unemployment, salary cuts, or increased grocery bills.

woman looking at computer
Credit: damircudic/Getty Images

“Planning ahead is usually advisable, but it will be particularly important this year. Given our current environment, products and services may not be as available as in years past, and delivery services will be pushed to their limits around the holidays,” says Nilay Gandhi, a Malvern, Pennsylvania-based certified financial planner and senior financial advisor with Vanguard Personal Advisor Services, not to mention most of us are facing more-stressed-than-usual budgets.

Here are five financially-sage strategies to consider so you can start budgeting for Christmas now.

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1 Create a List and Budget (and Stick to Both)

There is no “right” amount to spend per person, so we can’t offer a universal rule here, but note that your budget per gift and overall should be defined by your financial limits—not push them. 

“Budget a certain percentage of your income for all holiday shopping, then keep in mind that the relationship you have with the people for whom you're buying gifts. You’ll likely want to spend more money on gifts for family members than for work colleagues, for example,” suggests Jill Gonzalez, a Washington, D.C.-based analyst with the personal finance company WalletHub.

Gandhi recommends creating a generic “gifts” budget line item, then breaking that down by a specific dollar amount per person.  

“Once you have your budget in place, stay disciplined; it won’t serve its purpose if you deviate from it,” Gandhi says.

Once you have a budget, you can begin searching for gifts that fit that range and create a specific holiday shopping list.

2 Start Searching for Discounts Now

In addition to building your budget in the summer, now that you have your budget and ideas list, you can start keeping your eyes out for discounts. Sign up for clearance emails from related brands, seek out coupons, download the Honey web extension for discount codes for 30,000+ sites, and watch for brands that offer mid-year deal days or weeks similar to a smaller-scale Prime Day.

Related: 33 Cute and Clever Handmade Christmas Gift Ideas

3 Negotiate or Cancel Certain Subscriptions and Services

How many services do you subscribe to like Netflix, Hulu, Amazon Prime, Spotify, HBO Go, Disney+ (the list goes on and on…)? And how many do you use often enough to make their cost worthwhile?

“There are services that you can negotiate, or even give up altogether if you're not using them,” Gonzalez says. “Cable could easily be canceled, considering the number of streaming services and online news and entertainment available. It all comes down to figuring out what you're actually using.”

Truebill (free to $12 per month, can be a handy resource to help make it easier to cancel subscriptions, get refunds for outages, and potentially lower bills.

To determine if any services should be canceled, consolidated, or negotiated (it can’t hurt to ask about that cell phone bill!), start by making a list of all recurring services and determine why you signed up for this service in the first place, Gandhi says. Then ask yourself:

  • Does that reason still exist today? 
  • If so, does the value you are receiving align with the price you are paying? 

“If the answer to either question is no, this is likely a discretionary expense that can be discontinued, or at least reevaluated,” he says. “For many necessary services, such as internet access, there are likely alternative options at different providers or price points. By spending the time to evaluate all of your options, you may uncover opportunities to save.”

Other potential areas for shopping around or negotiating, according to Gonzalez: gym memberships, internet, landscaping, and insurance policies. (In case you missed it, here are the most common yet sneaky money-wasters.)

4 Monitor Your Expenses and Adjust Accordingly

Beyond a gift budget and subscription list, you’ll want to track your overall budget now—that is, if you aren’t already doing so.

“Create an itemized list of all possible expenses, no matter how small or large, to make sure you understand where your money is going. Determine if these expenses are necessary or discretionary, and if you are comfortable with them given your income,” Gandhi says. 

For example, rent or a mortgage payment? Necessary. That daily Starbucks run? Discretionary. (Try our DIY cold brew instead to save time and money!) 

“Regularly monitor your expenses and look for opportunities to make adjustments. Assign budgets to each expense bucket, such as housing and entertainment,” Gandhi adds.

Related: 11 Easy Ways to Save More Money Each Month (Without Feeling Deprived)

5 Redeem Your Rewards or Gift Your Time

Don’t forget about credit card points, store credit, and other potential sources of “cash” that you can tap into for your holiday budget fund. And recognize that you can always donate to a good cause, volunteer, or share an experiential present for a gift that will give back or keep giving through positive shared memories.

"The most important financial advice is don't overspend and get into debt that you'll carry for months after the holidays have passed. Holiday spending typically tends to increase year over year, and with it credit card debt spikes,” Gonzalez says. “Especially in light of the coronavirus pandemic and the economic crisis that has followed it, people should be more mindful of the money they spend this year.”

When you’re tempted to go off-budget or click to buy “just one more thing!” remember that one of the best gifts you can give yourself is peace of mind, and a stable and secure future.


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