How to enjoy the holiday season (without draining your bank account)

The holidays are a time of comfort and joy, not to mention significant spending. Between gifts, decorations, travel and entertainment, it would surprise few to know that people spend more during the holiday season than any other time of the year – and it’s on the rise.

A 2024 study predicts that despite the rising cost of living and ongoing economic concerns, Canadians will spend approximately $1,478 per household this holiday season, a 10% increase from last year. While it’s wonderful to celebrate generously, it’s important to be mindful of spending to avoid any financial stress when credit card bills come in the new year.

Here are some tips for those who want to avoid overspending this holiday season.

Make a realistic budget.

It’s easy to overextend yourself during the holidays, so having a budget can help you stay accountable and ensure you’re spending within your limits. Before buying gifts or planning your party, figure out how much money you can spend this holiday season. Your budget may be more or less than last year, depending on your current financial circumstances.

Whether you have less to spend this season or need to save more to meet your other goals, consider what you can do without. Maybe suggest capping the budget for the annual gift exchange (assuming others in your group also don’t mind saving a few bucks), try cutting back on eating out, or maybe resist the temptation of adding items to your cart for yourself this year when you’re bombarded with email offers.

Make a list and check it twice.

Buying gifts for others can be fun, but be careful not to go overboard. The best way to stay on budget is to make a list of who you’re buying for and sticking to it.

Creating lists can enhance your holiday shopping experience, helping you stay organized and avoid over-purchasing. By planning ahead, you can ensure that you have just the right amount of decorations and food for your celebrations. For instance, while it's tempting to have extra supplies for impromptu gatherings, being conscious of your actual needs can contribute to reducing food waste and saving money.

Avoid impulse buying.

Knowing how much consumers will spend over the holidays, retailers have developed clever ways of getting you to spend thoughtlessly. While there will be many discounts and sales that seem too good to ignore, try to determine if you’re buying something because you need it or simply because it’s on sale. Behavioural finance research has found that you can avoid impulse buying by waiting a few hours, or even a day, to decide whether to buy an item you’ve been eyeing.

If you’re online shopping, try putting the item in your digital cart and walking away for a bit. You can go back into your cart and purchase it if you’re still interested in it later. If you’ve forgotten about the item, there’s a good chance you may not have needed it in the first place.

Find different ways to save.

Even if you’re spending more this holiday season, there are many ways to pay less. Consider using your retailer reward points, and look for discounts offered during Boxing Day promotions for gifts or those necessities you’ve been saving for. If you have a credit card that offers cash back, consider using that money for holiday spending.

If you’re even a little creative, consider handmade gifts – everything from cards to baked goods to crafts – for friends and family members, who will appreciate the personal touch. Not only will you likely spend less, but your time and effort will be appreciated.

Save year-round.

One of the best ways to avoid that holiday money hangover is to manage your spending year-round. For example, if you know you’ll be travelling to visit family next holiday season, save a little money each month. Also, look for flight deals months (not days or weeks) before your departure date to get a better deal. Remember, the holiday season is often the most expensive time of year to travel.

If there are extra savings in your bank account after the holiday spending – or if you receive money as a gift this year – consider giving your future self a gift by using it to contribute to your Registered Retirement Savings Plan (RRSP). It will help reduce your taxable income, and could lead to a tax refund next year that might feel like a little post-holiday gift. Other good uses for extra cash this time of year include adding dollars to your Tax-Free Savings Account (TFSA) or First Home Savings Account (FHSA), if you qualify. Remember, the deadline for yearly contributions for TFSAs and FHSA is December 31. Just be sure not to go over your annual RRSP, TFSA or FHSA contribution limits.

With thoughtful preparation, you can savor the holiday season with fewer financial worries. Sticking to a budget, making lists, avoiding impulse buys and saving year-round will keep you on track through the holidays and over the long term.