Tips for Managing 2023 Holiday Spending

According to a recent survey conducted by Deloitte, the average American shopper is projected to spend approximately $1,652 on various holiday-related expenses this year. This is potentially adding strain to already stretched budgets, especially with the recent resumption of student loan payments. So, how can you maintain financial stability during this holiday season without compromising on the joy of the festivities?

• Set your boundaries. Establish your holiday budget, and set expectations with your family, friends, and loved ones. Will you be exchanging gifts? Are you planning on traveling to attend events with loved ones? Know what you’re willing (and able) to spend and clearly communicate that with the people in your life.

• Start a sinking fund. Once you’ve set your budget and boundaries, start planning ahead for anticipated costs, like gifts and travel expenses. You can use a sinking fund calculator, like this one, to figure out exactly how much money you should set aside over the coming weeks so you have the funds you need.

• Be careful with credit cards. You can reap credit card rewards and benefits so long as you pay each card off by the end of the month. Otherwise, you risk stacking on additional debt for discretionary spending, especially as the average credit card rate is more than 20%, a record high.

• Use credit card rewards. Instead of spending cash on things like gifts and travel, put your points and miles to good use. Ex: If you have a ton of Amazon points, use ‘em to purchase presents for loved ones. And if you’re traveling over the holidays, points or miles can help you save on flights and hotels.

• Start setting money aside. Save a portion of every paycheck between now and the end of the year. Ask your bank if they have “Christmas Clubs” saving account. These are separate, short-term savings accounts where consumers accumulate savings for holiday shopping and expenses. If not opening a Christmas Club account, consider “parking your money” in short-term savings options that have high liquidity and benefit from high interest rates, such as money market funds.