Ahh, Christmas.

It comes around just once a year and brings joy and lots of cheer! It’s the season of giving, cozy nights, settling in by a warm fire with hot chocolate, ice skating and endless Christmas parties.

Once the decorations come down and the tree goes out the door, all you have is a wallet with a holiday hangover and no money left to your name.

Sound familiar? You’re not alone! For many, overspending on Christmas is just a way of life.

The National Retail Federation survey shows that holiday shoppers plan to spend around $998 on everything from presents and pies to wrapping paper and trees. That’s all well and good when it’s a planned expense you can cash flow. All that holiday shopping can do a lot of damage when you put the whole Christmas spending on your credit card.

Let’s say you get carried away and put $998 of Christmas spending on a credit card with an interest rate of 17%. Then you decide to pay only the minimum payment of $25 each month because it just seems easier that way.

Get this: It would take you five years to pay off your balance! By the time it’s all said and done, your $998 worth of stuff would cost you $1,481.55—thanks to interest. Ouch! That’s an extra $483 (and some change) tacked on to your holiday bill—for just one year of Christmas spending. Imagine how quickly the dollar signs would stack up if you funded every single Christmas that way.

The Cost Of Christmas Debt

How to Avoid Christmas Debt

Going into debt—especially Christmas debt—is not the way to spend your hard-earned cash. This cycle of going into debt for presents and Christmas cheer isn’t going to end unless you decide you’ve had enough.

I’m not saying you shouldn’t buy Christmas gifts for the ones you love. After all, giving is the most fun you can have with money. So, if you can’t afford to buy Grandma a fancy cashmere scarf this year, that’s okay! She will still love you even if all you can afford to give her is your best batch of homemade cookies.

Here are some surefire ways to help you avoid Christmas debt with everything you’ve got:

1. Make a Budget

This is important! Making a budget on purpose before the month begins is the key to staying in control of your money. When you’re in a regular habit of making a zero-based budget every month, you won’t be caught off guard by having to buy an unexpected gift for the kids teachers. Why? You’ll have spent time planning your gift giving!

2. Say No to Credit

Swiping that credit card is easy. It may even give you a little bit of joy. But don’t fall for it. Every transaction you make with that credit card will drag you further and further into debt. Cut that sucker up and only spend what you have. And if you’re tempted to overspend, go back and look at your budget.

3. Save, Save, Save

Want to be a gift giver that rivals ol’ St. Nick next Christmas? Start saving right now. Yep—saving up for next Christmas is really pretty simple. Let’s say you want to budget $800 for Christmas 2023. Divide $800 by 10, then set aside $80 each month from January through October. Ta-da! By November, you’ll be ready to get a head start on your shopping.

Things to Remember When Making Your Christmas Budget

Just because you’re on a budget this Christmas doesn’t mean you can’t join in on all those fun Christmas activities. Grab your partner, pour some eggnog, and pull up your favorite budgeting app. (I love the EveryDollar app!) Here are the must-haves for your holiday budget:

1. Christmas Meals

Are you hosting Christmas dinner for your family or bringing your favorite side dish to a potluck? Plan your Christmas recipes ahead of time so you can wow friends and family with your cooking (and budgeting) abilities. This can be your year to bring more than just a can of cranberry sauce.

2. Holiday Travel

Plane tickets and hotel rooms aren’t the only travel costs to account for this time of year. Snacks at the airport, Uber or cab rides, parking, tips, and gas are some of the smaller expenses that can slip under your radar. Don’t forget to budget for these costs before you hit the road!

3. Christmas Decorations

While you’re probably excited to string up Christmas lights as soon as you’re finished eating on Thanksgiving Day, you’ll still want to make a budget before buying that eggnog smelling candle or new addition to your snow village collection.

Bottom line? Only buy things you’ve budgeted for—like that new set of outdoor lights or a beautiful flocked artificial Christmas tree.

4. Christmas Shopping

The sooner you start saving for Christmas, the sooner you can start buying presents! Now, if that doesn’t help spur you on, I don’t know what will. By starting early, you’ll actually have the time and the energy to find the best deals out there. Everyone knows about Black Friday and Cyber Monday, but the truth is, a lot of stores start offering discounts to Christmas shoppers much earlier than that.

But remember, you’re not out there shopping blindly. You already made your Christmas shopping list and budgeted for it—so if it’s not on your list, it doesn’t go into your cart!

5. Gifts You Usually Forget

You start off with the best intentions by making a list and checking it twice—but every year, you always forget somebody. Whether it’s gifts for teachers, coworkers, neighbors or even the mail carrier (yes, people actually do that), someone always gets left out. When you’re making your gift list, designate $20 in a category labeled “Miscellaneous Mysterious Person I’ll Probably Forget About.” See? Problem solved.

6. Higher Utility Costs

Christmas time means more visitors at your house—which means using more water, electricity, gas and heat. Brace yourself for higher bills thanks to more showers, more lights turned on, and more dishwasher loads. Ask your guests to help you keep costs down by cutting their showers short, shutting off the lights after they leave a room, and using paper plates to keep the dishwasher from constantly running.

If you don’t want 90% of your paycheck going toward your electric bill, don’t go too crazy with your lights display. For every minute it’s on, dollar bills are floating out of your pocket like snowflakes from the sky. I’m not saying you shouldn’t deck the halls—just keep it in check!

7. Christmas Cards

This one always sneaks up on us, doesn’t it? You might start off the season determined not to do the whole Christmas card thing. Then you get one in the mail from your cousin who had a baby this year, and seeing that newborn in a Santa hat reminds you how much your own kids have grown. The next thing you know, you’re searching online for the best family poses for Christmas card pictures—with matching outfits, of course.

Disclaimer: It’s okay not to send out a Christmas card. Nobody says you have to. Do what works for you. That could mean sharing a photo of your family on social media with a “Merry Christmas from our family to yours” caption or giving your neighbors warm wishes in person.

Have a Very Merry Debt-Free Christmas

There are plenty of ways to enjoy the Christmas season without all the Christmas debt.  A merry Christmas doesn’t depend on how much money you spend—it’s about the people you’re sharing time with and the memories you’re creating along the way. 

So on that note, don’t repeat the mistakes of Christmas past. Create a budget, start saving, and say no to using those pesky credit cards!