As winter holidays approach, there's a cheerful, frenetic energy in the air. It's a time filled with family, giving, community-building, delicious meals, and — for many — a psychological drive to spend money.

A Season of Spending

Even the most thoughtful planners can see their budget dissolve in the countdown toward Christmas, especially as they get caught up in the holiday spirit. Each year, the amount of money parents spend on their children climbs higher. In 2017, the average amount spent per child reached close to $500.[1]

Whether parents are keeping up with others in their social circles or fulfilling wish lists from Santa, even after controlling spending all year, many open their wallets because of the unique pressure accompanying the holidays. And non-parents aren't exempt from this phenomenon either; from travel expenses to extravagant gifts for loved ones, USA Today reports that 77 percent of people who set a holiday budget will end up exceeding it.[2]

Some parents are even dipping into savings and retirement accounts as they add presents to the pile. Time Magazine reports that 9 percent of parents have allocated emergency funds for holiday spending, while 7 percent have pulled money from retirement savings.[3] In the moment, these decisions might seem worth it, but they can have long-term consequences, from tax-time penalties to depleted funds when a real emergency strikes.

Keep Your Spending on the Nice List

  1. One of the most critical steps you can take toward spending within your means for the holidays is to set a budget. Sure, budgets are easy to break, but it's also impossible to stick to a budget if you don't have one.

    Your budget should take every holiday expense into account, down to the candles you'll buy for the menorah. A realistic budget is easier to follow, and accounting for everything, even the "small" stuff, gives you less leeway later to get off track. If it's not on the list, don't buy it!

  2. Next, examine your spending habits. Maybe you always have a tight grip on your wallet each year until it's time to head to the grocery store to buy what you'll need for a big Christmas Eve dinner. Somehow, as you walk the aisles and fill your cart, all of your careful planning disappears faster than a plate of Santa's cookies. Stay ahead of these spending triggers. Maybe send someone else to the store this year or make a list in advance and then order your groceries online.

  3. Get organized. With an inbox full of great holiday discounts and deals, it's easy to "need" a lot of items that you didn't budget for initially. While there are some circumstances when it can make sense to take advantage of a great offer, it's usually best to stick to your list—just like Santa. If you know ahead of time what you're buying and where you're shopping, it's easier to stick to your plan.

  4. Pick your splurge. Be intentional about where you pad your budget—leave yourself room to book cruise tickets for your parents or go ahead and gift yourself that luxury watch you've had your eye on all season. A single extravagant item doesn't have to blow your entire budget as long as you remember to build in the cash for it from the beginning.

  5. Finally, wait. Panicked purchases driven by a feeling of scarcity are a quick and easy way to derail your holiday spending plans. If you can, hit the pause button for 24 hours before buying any big-ticket items this year.

Remember, generosity can take on many forms during the holidays, from a home-cooked meal to volunteering your time for someone in need. And while it feels good to give someone you love a gift they'll cherish, that doesn't mean you have to go into debt over it.

Spend smartly this holiday season to help you feel good about your bank account — all year long.