Take Control of Holiday Spending: A Guide to Debt-Free Celebrations

The holiday season brings joy and connection, but for many, it also brings the unwelcome guests of financial stress and new debt. The good news is, you can change the narrative. By taking proactive steps now with your financial advisor, you can navigate this season with the confidence to enjoy celebrations to the fullest, stepping debt-free into the new year.

The Holiday Debt Trap

It’s easy to get swept up in the holiday spirit, but financial pitfalls are everywhere. The pressure to give generously, combined with rising costs for travel, entertainment, decorations, and meals, can quickly lead to impulse purchases and overspending. In fact, 36% of Americans went into debt during the 2024 holiday season. 1 As a result, many people enter the new year facing credit card balances, drained savings, and lingering financial anxiety.

Pre-Holiday Financial Check-up: Let’s Start Here

A clear snapshot of your current financial situation is essential. Review last year's holiday spending with your financial advisor. Gather bank statements, credit card bills, and receipts to categorize expenditures. This isn't about regret, but learning what went well and where overspending occurred provides invaluable information for the upcoming holiday season.

Afterward, assess your income, including any anticipated holiday bonuses. Audit your expenses, distinguishing fixed from variable costs, and identify areas for temporary cutbacks—perhaps fewer nights dining out or pausing a subscription—to free up cash. Review all current debts, noting rates and minimum payments. Finally, check your savings. Knowing your emergency fund's health and progress on other goals helps determine realistic holiday spending. This may seem overwhelming, but these small changes can help you see a comprehensive overview of your finances so you can make smart decisions going into the holiday season.

1 CNBC, December 26, 2024: https://www.cnbc.com/2024/12/26/36percent-of-american-consumers-took-on-holiday-debt-averaging-1181.html

Strategies for Refocusing and Strengthening Your Finances

Now that you’re aware of your financial situation, it's time to implement actionable strategies. Create or revisit your budget. It's a crucial step toward reaching your financial goals. A financial advisor can help you build a system that fits your lifestyle and family needs. A budget keeps you on track, with the right method. Whether it's an app, spreadsheet, or notebook, make it easy for you and stick with it.

Finally, take time to understand your spending habits. Track every dollar for a week or two to uncover any "money leaks." 2 Practice mindful spending by pausing before each purchase to assess if it aligns with your budget. A financial professional can help you choose the best budgeting method and provide accountability. They can also assist in analyzing debts, recommending effective repayment strategies, and integrating holiday savings into your broader financial goals to help you create strong and healthy financial habits.

Specific Holiday Financial Planning

With your financial foundation in place, you can apply these strategies to the upcoming holiday season for a debt-free experience.

Start by creating a dedicated holiday budget, separate from your regular one. Categorize all expected expenses: gifts, travel, food, decorations, entertainment, and anything else your family enjoys during the holidays. Based on your current finances, set realistic spending limits, and stick to them.

Get creative with gift-giving. Make a detailed list with a maximum amount for each person to avoid impulse purchases. Look for personal and budget-friendly ways to show appreciation, like homemade gifts or baked treats. Experience gifts—such as tickets or shared outings—can offer lasting memories without adding clutter. And don’t wait to shop or book travel. Planning early helps you find better deals and keep more money in your pocket.

Maintaining Momentum Beyond the Holidays

2 Fidelity “Plug money leaks draining your budget,” August 22, 2024: https://www.fidelity.com/learning-center/smart-money/hidden-fees-and-costs

After all the effort you’ve put into planning, make sure to enjoy the season and have some fun—you’ve earned it. But remember, financial preparation doesn’t stop when the holidays end. Schedule a post-holiday check-in with your advisor to review how your actual spending compares to your budget. Use what went well—and what didn’t—as insight to strengthen your approach for next year.

The goal is to continue good habits. Maintain a regular budget and understand your long-term financial goals. If new holiday debt couldn’t be helped, create an immediate repayment plan. As the new year begins, set fresh SMART financial goals—Specific, Measurable, Achievable, Relevant, and Time-bound—using the lessons you’ve learned to build a stronger financial future. 3 They can help you stay on track and adapt your financial goals as circumstances change.

Proactive financial planning is extremely important for a stress-free holiday season. By taking control of your budget, boosting savings, and fine-tuning your spending habits, you can replace financial stress with confidence and truly enjoy the holiday season. You have the power to take control of your holiday finances and enjoy the season—without the weight of debt hanging over you. Make smart choices now, and your future self will thank you.

3 Dessert Financial “Setting Smart Financial Goals” July 31, 2024: https://www.desertfinancial.com/en/financial-well-being//blog/financial-education/smart-goals#

Investing involves risk, including the potential loss of principal. The information provided is for general educational and informational purposes only and is not intended to serve as specific financial, investment, or tax advice. Individual circumstances vary, and you should consult with a qualified financial or tax professional before making any financial decisions.