Head Into Shopping Season Ready to Manage Spending and Debt

Retailers once again have begun their bid for consumers’ attention with big sales early in fall, such as what amounts to a second Amazon Prime Day sale. A longer holiday shopping season lets you spread out expenses, but it also could lead to overspending.

Danetha Doe, founder of financial education company Money & Mimosas, said in an email, “It's easy to go into unplanned debt during this time because many of us show love to those we care about by buying gifts or by spending money on travel to be with loved ones.”

NerdWallet’s 2023 holiday shopping report bears that out: 52% of Americans incurred credit card debt from holiday shopping last year, and 31% of them still have lingering balances. Survey results also show that nearly 2 in 5 2023 holiday shoppers (39%) feel pressure to spend more on buying gifts than they’re comfortable spending this year, and 12% of 2023 holiday shoppers say they will likely use some of their emergency savings to buy gifts.

Whether you’re dealing with debt or trying to avoid it, here are some strategies that can help.

1. Create a spending plan

Take a good look at your finances before you do any spending, and figure out how much you can afford to put toward gifts and other costs. That can help you avoid a financial shock later.

“Developing a spending plan before you enter the holidays will help you avoid waking up on New Year's Day with a financial hangover,” Doe said. “Your plan could include a list of all of the people you wish to buy a gift for and/or your estimated travel costs if you are visiting loved ones.”

2. Set financial boundaries

A financial boundary is a limit that you set to protect your money. Boundaries can be especially helpful during the holidays as you navigate the pressure to spend.

“Your financial boundaries may mean that you won't participate in gift-giving because your money has other priorities,” Doe said. “Perhaps you're saving up for a home, paying down debt or starting a business.”

Aim to set boundaries before getting into the thick of holiday shopping. For example, you might set a rule of waiting at least a day before completing an online purchase.

“The key to sticking to your financial boundaries is mindfulness,” certified financial therapist Celia Hughes said in an email. She suggested holding items in your online shopping cart for at least 24 hours. “Come back and see if you still want to make the purchase.”

“Slowing down decision-making supports holding down your boundaries," Hughes said. "If you’re shopping in a store, take pictures of what you want to buy and then go home and sleep on it.”

3. Spend time rather than money

Money is a source of stress for many people during the holidays. Prioritizing experiences and your relationships can lift worry from you, and your family and friends, by shifting the focus away from spending.

“My advice to everyone, even if you are in a financially healthy place, is to focus your holidays on experiences and relationships,” Hughes said. “It may feel like a leap to move away from extreme consumerism, but when your loved ones remember time together and time with you, it will be easier for that to become the norm.”

4. Opt for low-cost gift-giving

Choosing to focus on lower-cost gifts is another way to capture the festive spirit without deepening debt or adding financial stress.

“For example, you could exchange handwritten letters of appreciation to each other rather than buying each other gifts,” Doe said. “If you're feeling artsy, you could offer a DIY gift such as a candle, a hand-drawn card, an air freshener made with fresh spices placed in a Mason jar, ornaments, a candle holder or homemade jam.”

And if you still want to experience some holiday shopping, Hughes suggests: “Consider a gift exchange, where each person secretly draws the name of another family member, and sets a low spend amount, with the task of finding something that reminds you of your favorite thing about that person.”

5. Use cash

Using cash over cards may help you to be more mindful of your spending — especially during sales.

When you use a credit card, Doe said, “It is so easy to swipe it and forget it, but if you have to pull out the cash, you will be less likely to impulsively spend.”

6. Make a debt paydown plan

As your spending plan and boundaries help you keep holiday costs down, think about pushing those savings into debt paydown to give yourself the gift of lower balances.

If you need inspiration to stick with it, try the debt snowball method. Focus that extra money on your smallest debt first (still pay at least the minimums on your other debts). Because you're starting small, you'll have a shorter time until payoff. When that debt is paid off, turn to the next-biggest.

Or if you're worried about interest costs, try the debt avalanche method. With this strategy, you focus on the debt with the highest interest rate first.

Also, debt consolidation can help by combining multiple debts into one payment — ideally with a lower interest rate. If you have good credit, you could look into a 0% interest balance transfer credit card or a debt consolidation loan.