Budgeting tips for the holiday season

The holidays are about peace, joy, and happiness, right? But they can also be a source of financial stress. In fact, 28% of shoppers say they’re worried about the cost of holiday shopping, while 16% feel pressured to spend more than they're comfortable with.¹

To avoid financial turbulence in the new year, having a holiday budget can be key. This article explains what a holiday budget is and offers strategies on how to celebrate the season without breaking the bank.

Creating a holiday budget

The first step toward an enjoyable festive season is working to keep overspending at bay. One way to do that is to create a holiday budget. Here's a closer look at that process:

What is a holiday budget?

A budget for the holidays is simply a plan for how much money to spend on expenses like presents, travel, food, and decorations. Developing that budget involves setting limits for the various expenses that come with celebrating the season. By establishing these boundaries, shoppers are less likely to get swept away by enticing window displays or flash sales.

Estimating expenses during the holiday season

There's no reason to have to guess how much money is being spent around the holidays. Anticipating — and then managing and tracking — expenditures goes a long way. Tracking expenses starts with identifying all potential costs, including:

• Gifts. Presents for family, friends, colleagues, and others (teachers, bus drivers, mail carriers, etc.)

• Decorations. Festive decor for the home, both indoor and outdoor

• Food. Ingredients for special meals and gatherings, as well as for foods to be used as gifts

• Travel. Transportation, gas, accommodations, and meals

• Entertainment. Tickets to holiday shows, events, and attractions, as well as new attire

• Miscellaneous. Holiday expenses such as postage, wrapping paper, and batteries

Set spending limits to avoid overspending

The next step is to set realistic spending limits for each category. This might involve asking questions like: What are the most important aspects of the holidays for me and my loved ones? Where can I prioritize spending to align with these values?

Pro tip: It may be wise to consider pre-saving for holiday expenses. PayPal Savings,² for example, lets individuals create dedicated goals (like a holiday fund) and set up automatic savings to stash away cash throughout the year. That way, when the holiday season is here, shoppers will have a financial cushion to help them celebrate.

Leverage budgeting and tracking tools to simplify the process

Imagine having a clear, visual picture of your holiday budget alongside everyday expenses. That's the power of budgeting tools and spreadsheets.

This means more informed decisions about how to budget effectively and more confidence in adjusting strategies as needed throughout the holiday season.

How to save this holiday

Beyond tracking savings, there are plenty of ways to make funds go further this winter. Here are some smart holiday spending tips.

Shop with cash back cards

Cash back credit and debit cards offer a percentage of cash back on eligible spending, effectively putting money back in shoppers’ pockets.

For example, the PayPal Debit Card³ allows cardholders to earn 5% cash back⁴ in a chosen category each month. For those anticipating significant spending on, say, clothing or electronics during the holidays, strategically selecting that category for cash back can mean greater savings.

Use cash back apps and coupon finders

Cash back apps and online coupon finders aren't just for bargain hunters — these platforms overflow with shopping deals for everything from gifts to festive decorations.

The PayPal app puts hundreds of cash back offers⁵ from top brands at shoppers’ fingertips, making it easy to earn cash back on every purchase. Similarly, the PayPal Honey shopping extension does the heavy lifting, automatically searching for and applying coupons at checkout. Shoppers can also set up price tracking alerts to snag the best deals.

Stack offers and rewards to save even more

The secret to maximizing savings is combining cash back offers, loyalty rewards, and other incentives whenever possible.

For example, shoppers might earn 5% cash back on purchases within a selected category with the PayPal Debit Card³ and stack it with exclusive merchant deals saved in the PayPal app that are in the same category. This could even be combined with deals shoppers find during seasonal moments such as Black Friday. It's a simple way to make every dollar count and have more to spend on holiday cheer.

Find free or low-cost alternatives

Just because it’s free or low-cost doesn’t mean it lacks holiday magic. From festive light displays to neighborhood caroling, affordable experiences can embody the spirit of the season without the hefty price tag.

When it comes to gifts, shopping secondhand can be a great idea. Thrift stores, consignment shops, and online marketplaces are treasure troves of unique and affordable gifts.

Lastly, there's the power of homemade gifts or thoughtful experiences. A home-cooked meal or a fun-filled game night can create memories that last far longer than store-bought items.

Spread out the costs

Spotted the perfect gift? Buy now, pay later services, like PayPal's Pay in 4⁶ and PayPal Monthly⁷ can spread out the cost of big-ticket items into manageable installments, making it possible to treat loved ones while still shopping on a budget.

It's important to keep in mind that buy now, pay later services are a form of credit and should be used responsibly.

Manage holiday debt

While the holiday season brings joy and celebration, the lingering shadow of debt can cause stress and anxiety long after the decorations have been packed away.

Using these strategies to pay off holiday debt can help bring peace of mind:

• Take inventory of debts. Listing all outstanding balances can provide a clear picture of the financial reality.

• Revisit the budget. Identifying areas where it's possible to cut back can help to prioritize necessities and trim the fat on discretionary spending, like dining out or entertainment.

• Create a debt repayment plan. Deciding how much can be dedicated to debt each month and setting achievable goals are important steps in developing a plan.

• Planning for the unexpected. This involves setting realistic spending goals, automating savings throughout the year, and sticking to the budget. It's also wise to start saving for emergencies, creating a financial safety net that can be used for unexpected expenses from a leaky roof to a sudden medical bill.