How to avoid budget-busting holiday spending traps


Overspending and the holidays go together like milk and cookies. Everywhere you turn, there’s another opportunity to spend money on everything from gifts and travel to seasonal treats. This puts a strain on the average person’s budget, even if they have carefully thought about how much they want to spend in November and December.

Before the holiday season gets fully underway, here’s what you need to know about the most common spending traps that could leave you with a financial hangover come January.

Plan early and often

Consumers expect to spend an average of $1,530 this holiday season, according to PwC’s 2023 Holiday Outlook. Specifically, consumers have allocated $786 to spend on gifts, $510 on travel, and $234 on entertainment.

It’s impossible to know if the 4,000 consumers surveyed for this study had already planned their holiday spending budget, or if responding to the survey was what prompted them to think about holiday costs. We also can’t know if the amount these consumers expect to spend is a reasonable estimate, or if they will spend more or less than planned.

This is why it’s important to take the time to plan out your holiday spending—and not just once, but periodically through the holiday season.

For instance, you might decide to spend $750 on gifts and $500 on the round-trip flight home. Making that spending plan is the first step—but what will you do if it turns out that flights are more expensive than you anticipated?

If you don’t review your holiday spending plan as you make seasonal purchases, you might just grumble about the higher flight cost while pulling out your credit card and blowing right past your budgeted amount. Reviewing your budget and your spending throughout the season can help you stay on track and avoid a very grinch-like January.

Additionally, even if you’re only just now starting to think about this year’s holiday spending, it’s worthwhile to create a holiday savings account and set up an automatic recurring transfer. Even if it doesn’t cover all of this year’s expenses, it will come in handy.

What’s even better is that continuing your automatic transfers through the new year will ensure you have money already set aside for next year’s holiday season.

Beware the “what the hell” effect

Overspending can be dangerous any time of year—but since the holiday season falls at the end of the calendar year, blowing your holiday budget can make you vulnerable to what psychologists call the “what-the-hell” effect.

This effect describes how going over budget (or otherwise indulging) feels like an all-or-nothing proposition. If you go over the holiday spending plan a little, you may think it’s reasonable to keep going since you’ve already “failed.”

Your brain may tell you that since you already spent more than you planned, you might as well buy more gifts, splurge on the good champagne, and upgrade your flight. What the hell, right? Paying for things is a January problem.

But there is a big difference between overspending a little and overspending a lot, especially if you are using credit cards to make your “what-the-hell” purchases. The average credit card debt per household is currently $7,951, and average interest rates on revolving credit cards are nearly 21%.

This is why we need to let go of the idea that budgeting is something you either succeed or fail at. Such black-and-white thinking makes it more likely that you’ll give up if you slip up, instead of recognizing that every day is another opportunity to make choices your future self will appreciate.

Leave room for holiday surprises

Not all holiday spending goes according to plan. There are always things like last-minute gifts, higher utility bills, shipping costs, and extra food purchases during the holiday season that you might have forgotten to include in your holiday budget.

These surprises can feel a little like forgetting about your aunt’s famous sweet potato pie until after you’ve made your Thanksgiving plate. If you fill up on turkey and trimmings, you might have to wait a few hours before cutting yourself a slice—and who knows if there will be any left by then.

To deal with holiday spending surprises, leave a little room in your budget (like you left in your stomach at Thanksgiving) so you can handle the unexpected costs without getting the financial equivalent of a stomach ache.

Leaving room in your budget might mean taking on a little less. For example, you might revise your gift-spending budget from $750 to $650 to leave a little extra in your account. You might ask your family to consider potluck to reduce the food budget you planned. Or you could decide to forgo Nutcracker tickets this year in order to keep some money in reserve.

This can feel a little off-putting, in the same way that it may feel odd to only take a small serving of everything at Thanksgiving dinner instead of loading up your plate. But choosing ahead of time what is most important in your holiday budget (or on your holiday plate) means you get to enjoy what you like most—and leave room for surprises.

End the year strong

Ending the year feeling financially in control is one of the best gifts you can give yourself this holiday season.

To avoid making financial choices that might put a damper on your new year, plan ahead for your holiday season and regularly check in on your budget. This will help keep you from throwing in the towel if you do make a spending oops or two, and can better help you roll with the punches when an unexpected expense rears its not-so-merry head.


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