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How to avoid debt this holiday season

By Denise Dunckel Morse

Black Friday and Cyber Monday are over, but the holiday shopping season is just getting started. 

Retailers simply will not relent. 

In fact, in 2022, global retailer email volume increased by nearly 25 percent in the final three months of the year from the previous three quarters. And it already feels like volume has increased even more this year! It is no surprise, then, that nearly one quarter of Americans are still in debt from last year’s holiday spending spree. 

The temptation to spend can be overwhelming, but you do not have to go into debt this holiday season.

How to set a holiday budget

An annual budget is a household essential — and so is a holiday one. The key is to start by identifying the resources you have … not by asking for wish lists.    

Christine Whelan, clinical professor of consumer science at the University of Wisconsin-Madison, told NerdWallet consumers should determine what they have in checking or savings and absolutely not rely on credit cards. “One of the ways we can use our limited resources to maximize our happiness is to pay now, rather than get socked with a credit card bill in February, which undermines our financial and emotional well-being,” Whelan said.

It is also wise to avoid “buy now, pay later” (BNPL) schemes. According to Adobe Analytics, this type of payment, which allows consumers to pay down purchases in installments (generally with fees or interest kicking in at some point), surged more than 70 percent over the Thanksgiving holiday. According to the Consumer Financial Protection Bureau (CFPB), BNPL use has increased ten-fold in two years. 

“Put simply, buy now, pay later can be compared to a credit card that incorporates informercial-style payment plans,” said CFPB Director Rohit Chopra. “While major providers don’t currently rely on charging interest, they make money through fees charged both to sellers and to consumers who don’t pay on time.”

Once you have your bottom-line spending number, has advised being detailed in your holiday spending plans. Your list obviously should cover all gifts — including stocking stuffers and gifts for teachers and holiday hosts — but you also want to consider:

  • Shipping costs
  • Gift wrapping supplies
  • Special food purchases beyond your normal grocery budget
  • Travel
  • New clothing for get togethers or religious rites
  • Tips for service workers like the postman, trash collector, and others 
  • Holiday cards

Set a budget for each of these line items, advised, and then adjust if you are over budget. “If your total budget is spent before getting to all the items on your holiday spending list, you’ll need to make a choice, either lower the anticipated spending amounts on your higher-priority expenses [or] eliminate the categories that your budget couldn’t accommodate,” concluded.

Consider DIY, which is better for your budget … and your mental health

For too many people, especially those facing financial hardship, the holidays spark a wave of loneliness. These feelings are especially worrisome when depression rates already are rising more generally. 

According to Healthline, making your own holiday gifts comes with incredible mental health benefits. That’s because engaging in creative activities decreases anxiety, stress, and mood disturbances and people who play music, paint, draw, or write experience lower levels of mental distress and increased levels of mental functioning and life satisfaction.

Giving DIY gifts also will forge a deeper sense of connection. In a series of post-Thanksgiving Instagram posts, the organizational psychologist Adam Grant said the best cure for loneliness is meaningful interaction. He also said, “Giving is the greatest source of meaning.” 

Even if you don’t crochet, paint, or woodwork, you can DIY your holiday. An internet search offered several low-cost DIY gift ideas, including:

  • For the grandparents: A pop up photo box
  • For the family organizer: A 2024 calendar using your favorite family photos
  • For the kiddos: Gift certificates for small, but special, treats throughout the year like a favorite homemade meal, dessert, or even a night at the movies
  • For the spa lover: A homemade sugar scrub or lip balm
  • For the worker bee: A homemade heating pad — it’s real — check it out here
  • For the gourmand: Decorated box with family recipes

And for teachers? Nothing beats a sincere thank you letter from both parent and child. 

Resolve to do better in the new year

Jerry Graham, co-founder of, told NerdWallet he starts planning for the holidays in January. He and his partner track all of their holiday spending — from presents to décor — divide it by 12 and set up an automatic transfer to a savings account that will extend into November. 

“By December, we have enough money to cover holiday spending, including decor, food and gifts,” he said.

For a throwback way of savings, try the envelope challenge. As Fidelity explained, this approach involves numbering envelopes — let’s say 1 to 45 — and stashing cash in them. Each week, you pull a random envelope and put aside the dollar amount listed. The next week, you pull another envelope … and the next week, another … until all of the envelopes are used.

The savings quickly add up. If you start the first week of January, by Black Friday 2024 you will have an eye popping $1,155 saved for all of next year’s holiday needs! 

The holidays are stressful, but they do not have to mean going into debt. You can come through with your financial freedom intact. Good luck and best wishes this holiday season!