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Five Ways the Holidays Can Burn Your Budget (and How to Avoid It)
The holidays may be a wondrous and exciting time of the year, but that doesn’t mean they’re free from pitfalls. Not only do Americans tend to eat more (and pack on weight) over the holidays, but we all spend a lot more, too.
This holiday shopping season could be one for the record books. The National Retail Federation predicts 2017 holiday sales will increase 3.6% to 4% over last year, which was already its own record year. This means consumers could spend as much as $682 billion on holiday shopping this year, or up to $976 per person.
That’s quite a bit of cash to fork over for parties, decorations, and gifts that may or may not be necessary or even wanted. Unfortunately, a lot of the holiday hoopla (and associated spending) is often a waste, weighing heavily on our cash reserves and leaving us worse off by the time the new year rolls around.
Five Holiday Money Drains to Avoid
The holidays are a time to spend with family and celebrate your faith, but they can easily destroy your financial goals, too. If you want to make it to New Year’s without facing financial ruin, here are a few money drains you should try to avoid:
#1: Generic Gift Exchanges
Gift exchanges can actually be a good way to help everyone cut down their holiday shopping bill. Instead of buying for each person in your family, many groups have everyone pick a name from a hat (or use some other system) so that everyone is only buying for one other person.
Unfortunately, not all families or groups run their gift exchanges this way. Some decide to go with anonymous or generic gift exchanges that require everyone to bring a $20 (or any price) thingamabob that will end up in a random person’s hands.
Generic gift exchanges are the worst because, well, you have no guarantee your person will enjoy what you buy – and you may end up with something you don’t want, either. Sadly, I’ve experienced this misfortune firsthand. One time, my husband and I each purchased a $20 generic gift for an exchange only to bring home a new set of jumper cables and a ceramic elephant in return. I might as well have set $40 on fire instead.
The fix: If you’re able and willing to take the heat, try telling your family or work group you don’t want to participate in a generic gift exchange. Better yet, suggest a white elephant exchange where everyone brings a random, unwanted item from home instead. White elephant gift exchanges are a fun alternative, and you may actually end up with something you want — or at least a good laugh. Plus, there’s nothing to lose, since nobody has to spend money – you can just grab something funny lying around the house that you don’t really want, and wrap it up for the party.
#2: Secret Santa (or Sneaky Santa)
Secret Santa exchanges are another common gift-giving routine for workplaces and extended families. Everyone draws a random name – the person they’ll be buying a present for. But the “giver” is supposed to be a surprise until the end.
While Secret Santa groups with a firm price limit may be no big deal, these schemes are notorious for getting out of hand. A friend of mine recently told me that, in her office, her Sneaky Santa easily spent $100 or more on her because firm price limits weren’t set ahead of time.
The fix: If you’re going to join a Secret Santa group or jump into the one at work, make sure there are clear spending limits ahead of time. Spending $10 or $20 on a co-worker may not break the bank, but dropping significantly more than that could be a hardship – especially if you weren’t expecting to spend that much.
And, if you’re overly worried or just don’t want to spend the money, don’t feel bad opting out altogether.
#3: Stocking Up on ‘Stuff’ You Don’t Need
The holiday season is ripe with deals intended to get us to part with our hard-earned dollars. From Thanksgiving week to Black Friday, Cyber Monday, and basically the entire month of December, you can score stellar discounts on everything from household goods to clothing to electronics.
The good news is, the holidays are a great time to stock up on items you actually need. Sure, you’ll shop for holiday gifts, but why not save on items you need to buy anyway?
The bad news is, it’s far too easy to use these deals to justify purchases you shouldn’t really be making. We all know clever marketing ploys and flash sales get us to spend more, but the rush of holiday sales and “door buster” discounts only exacerbate the effect, whether you’re throwing in an extra pair of jeans just to hit the free shipping threshold or convincing yourself that it’s time for a new blender.
The fix: Before you shop over the holidays, make a list! There’s nothing wrong with treating yourself or getting a deal on the stuff you need, but you’ll spend less if you make a careful and thoughtful list of items you actually need ahead of time. It can also help to make a shopping list with spending limits for everyone you plan to buy for this year. Without a list or limits, you’re almost doomed to spend more than you intended.
#4: Not Paying Off Your Credit Card Balance
Unlike previous years, you’ve decided this is your year to earn cash back on Christmas presents. You signed up for the Chase Freedom® card early once you found out it offered 5% cash back at Walmart and department stores this quarter, and you’ve steadily used the card for all your holiday gifts so far.
But then, the bill actually comes… and you find out that you’ve spent more than you wanted, and more than you can pay back. So now, instead of benefiting from cash-back rewards, you’re stuck carrying a credit card balance and paying double-digit interest on your purchases instead.
Unfortunately, this scenario happens all the time. About two-thirds of Americans who took on holiday debt in 2016 weren’t planning on it, according to a survey by Magnify Money, and nearly half said they’d need four months or more to pay it all off.
The fix: The best way to ward off holiday debt is to shop with a list and a budget in mind. Buy only what you can afford, and only splurge on “extras” if you’re sure you have the cash to cover the bill this month. Not everyone benefits from credit card rewards — after all, somebody is paying the credit card interest that fuels these generous rewards programs. If you’re worried you may not be able to stick to a budget or plan, that somebody could be you – and you may be better off eschewing credit card rewards and sticking to cash or debit instead.
#5: Return Policy Mishaps
Another way to lose money this holiday season is to bungle your holiday gift return policies – or worse, throw away receipts. While lots of retail stores let you return items without receipts for store credit, you won’t always get the full value when you do (I’m looking at you, Kohl’s). Further, you might be stuck with items if you don’t understand a store’s return policies or know how long you have to get them back to the store. Hint: Check out our list of stores with the best return policies for details on retailers who are most generous in this regard.
The fix: It’s crucial to make sure you save receipts for all of your gifts and other holiday purchases. It might even help to keep a special folder or envelope for your receipts. If you’re doing a lot of online shopping, make sure to set up an email folder where you can store digital receipts as well.
Using a good rewards card that offers guaranteed returns is another way to avoid return policy mishaps. The Chase Freedom® card very generously offers guaranteed returns “if you are dissatisfied with a personal item that you purchased and the merchant will not accept the return.” You do have to use your card for the purchase for it to be eligible, however. Also, this protection is only offered on top of store guarantees or protections, or as a last resort. Fortunately, coverage is good for up to $250 per item with a limit of $1,000 per year.
The Bottom Line
The holidays are rife with situations where you’re expected to spend whether you want to or not. Between lavish holiday parties and pushy co-workers trying to rope you into who-knows-what, there are more opportunities to spend over the holidays than most people – or budgets – can handle.
Fortunately, you do have some control over your spending and the events you choose to participate in. And, like it or not, sometimes you just have to suck it up and say “no” to the people you love – and to yourself.
The holidays should really be about faith and family anyway, so don’t feel bad about setting limits. Your family and co-workers might raise an eyebrow if you buck the system, but your pocketbook will thank you.
- Three Tips to Spend More Mindfully This Holiday Season
- Five Reasons Everyone Should Get the Chase Sapphire Preferred® Card
- Best Cash Back Credit Cards of 2019
Which holiday money drains are you trying to avoid this year? Please share in the comments below.
Please Note: Information about the Chase Freedom® has been collected independently by TheSimpleDollar.com. The issuer did not provide the details, nor is it responsible for their accuracy.
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