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The pressure of the holidays can cause financial financial anxiety. Even with a budget, it’s easy to overspend during the holiday shopping season. But no one wants to start the new year with a financial hangover that can be avoided.
Inflation is still high, though it’s approaching the Federal Reserve’s 2% goal, After years of sky-high inflation, the prices of everyday goods remain elevated. The pressure to buy gifts and stretch your budget can damage your finances for months to come. Overspending during the holidays can also make it harder to afford monthly bills like student loan payments, which can be detrimental in the long term.
According to CNET’s holiday shopping survey, the majority of US adults plan to shop this holiday season, and 41% plan to shop Black Friday and Cyber Monday sales for savings. But as those deals flood our screens right now, it’s time to make a plan to keep your finances and budget on track.
Make a budget you can stick to
Roughly 16% of shoppers told CNET they were likely to spend more this holiday season compared to last year. To avoid falling under this category, create a budget to figure out how much you can afford and stick to it.
Using Excel, Google Sheets or a budgeting app, divide your holiday shopping into categories and set an appropriate budget that won’t put your finances in a precarious position. For example, if you’re attending a potluck this holiday season, you could provide a homemade dish instead of picking up catering from a restaurant.
Read more: These Budgeting Apps Make Holiday Gift Buying a Breeze
Shop with cash to stay on track of spending
Using a credit card for holiday shopping has its perks, including purchase protection and extended return policies. However, an MIT study found that parting with physical dollars at the register versus tapping your credit card elicits a higher degree of pain.
So how are people paying for holiday purchases? The majority are using debit cards (46%) and cash (41%), while slightly fewer plan to use credit cards that will be paid in full before interest kicks in (31%). Credit cards have an intangible “deal with it later” quality.
But when you use cash, you only pay with what you have in your wallet, and that can improve your chances of sticking to a budget. And while debit cards are technically similar to cash and can improve your chances of spending less, remember that they lack the purchase and theft protections credit cards typically offer.
Set holiday gift expectations now
There’s often pressure to get the best gifts for your loved ones, and we sometimes feel we need to match what others spend. But if you don’t want to skip gifts entirely, one way to relieve the burden is to discuss setting a price limit or spending cap for gifts.
For example, instead of buying a gift for every person at your holiday party, you could propose a white elephant or Secret Santa gift exchange. Both of these gift-giving games only require you to bring one gift. Combine that with a price limit, and you’ll spend a lot less this holiday season.
Read more: Don’t Let Gift Guilt Ruin the Holidays. 5 Tips From a Money Coach to Rein in Spending
Use credit cards wisely
According to the survey, nearly one in five (16%) shoppers plan to use credit cards that they’ll pay back over time. But turning to credit cards when the average credit card APR is 20.42% can lead to debt. If you don’t have the cash to pay for your upcoming holiday shopping haul, your Black Friday deal just got more expensive.
Meanwhile, 11% will use Buy Now, Pay Later plans to cover holiday costs. If you plan to use one of these installment plans, read the terms and conditions so you understand the repayment schedule and the consequences if you fall behind. Plans such as Affirm, Afterpay and Klarna have become increasingly popular because they offer an interest-free payment method in multiple installments (typically four). But there are pitfalls, especially if you pay late, including interest for many. If you suspect you won’t be able to cover the cost of your gift on schedule, think twice about using a BNPL plan.
Score savings with cash-back apps and browser extensions
An easy way to find deals this holiday season is through internet browser extensions that scour the web for coupons and online rewards. Cash-back apps are free tools that can help you earn rewards and discounts when you shop online or in person, depending on the app. When you make a purchase using a cash-back app, you’ll get money back. Some apps give you the savings upfront with coupon codes, while others pay you in rewards you can redeem as cash back or gift cards.
For example, Ibotta partners with thousands of retailers, including Walmart, BestBuy, Amazon, Home Depot, Uber and Kroger. You can earn cash back every time you shop at one of Ibotta’s affiliated retailers, on the app or in-store. And when you’ve reached $20 in cash back, you can redeem the rewards for a gift card or link and transfer it to your PayPal or bank account. If you’re shopping in-store, you’ll need to link your store loyalty account with your Ibotta app or upload your receipt to the app to earn cash back.
If you’re looking for additional savings, add a browser extension before shopping online. Some items or retailers may offer additional deals and coupons that you wouldn’t otherwise get. We recommend CNET Shopping, but our experts also recommend a few other browser extensions.
