Smart Holiday Budgeting: Save More, Spend Less This Year

As the holidays approach, many are bracing themselves for an expensive shopping season amid tariffs, inflation, and overall rising living costs.

As a result, according to PwC's 2025 Holiday Outlook, 84% of consumers said they plan to cut back on spending over the next six months—especially on dining out, clothing, and major purchases. Still, respondents expect to spend an average of $721 on holiday gifts (down from $814 in 2024). And more than half plan to resort to credit cards to cover this expense.

But experts say this is a costly mistake.

“Ideally, it’s best to avoid debt during the holiday season,” said Casey Brueske, community education development specialist at PenAir Credit Union. “Debt during the holidays carries over into the new year, putting you in a deficit before you have time to make your financial resolutions for the new year.”

The good news is that there's still time to prepare your budget for the busy spending season.

How to Keep Your Budget in Check This Holiday Season

To avoid debt in the New Year, the first step is to organize your finances now so you're prepared for the added pressure of holiday expenses later.

If you haven't already, add a line item for holiday expenses to your budget. Creating a holiday "sinking fund"—a small amount of money regularly set aside to cover irregular, unplanned expenses—can provide you with financial security for gifts, travel, and other holiday-related expenses without having to cut back on other spending.

Don't know where that money will come from? Perform a budget audit: Review your recent spending to identify areas where you can cut back (e.g., eating out, streaming services, subscriptions) and put that money toward your holiday savings.

You can boost your savings by putting your holiday sinking fund into a high-yield savings account (HYSA) with a competitive interest rate. Some of the best HYSAs currently earn over 4% annual interest, which means your balance will accrue interest and continue to grow without any extra effort on your part.

Set a Spending Limit—and Stick to It

Decide how much you can spend in each category—whether it's $30 per gift or $300 total for travel—and commit to staying within that limit. This discipline helps you weed out impulse purchases that can derail your budget.

“It’s easy to get caught up in the spirit of giving, but setting a spending limit can make the holidays far more enjoyable,” Brueske said. “When you build your budget, take stock of who you plan to get gifts for and how much you’re comfortable spending on them, all the gatherings, and travel, then break it down by category. Don’t forget to include all the little extras like decorations, holiday cards, and last-minute stocking stuffers.”

Start your shopping early

Who says you have to wait until December to buy gifts? Start shopping early so you have time to compare prices, find sales, and use discount codes—ensuring you get the best deal on everything you need.

Bruske also suggests researching retailers that offer price-match guarantees during the holidays to ensure you don't end up paying more than you should. "Dates and policies can vary from company to company, so it's important to review any discounts before claiming them," she said.

Give your budget a break with seasonal work

If you have the time and energy, taking on a temporary part-time job or seasonal work can help you earn some extra money and cover holiday expenses. Consider picking up a few shifts at your favorite store, delivering groceries, or selling handmade items to friends and family.

Look for creative opportunities to save money

In addition to cutting monthly expenses from your budget and earning extra income, you can take some more creative steps to reduce spending this time of year.

For example, if you're feeling overwhelmed, reducing the number of gift recipients may help. You could suggest exchanging gifts between friends or family members. Focusing on one thoughtful gift instead of several small gifts can make giving to charity more meaningful and budget-friendly.

Another way to ease the financial burden during the holidays is to utilize your credit card rewards. The points you accumulate throughout the year can often be redeemed for gift cards, airline miles, or even merchandise. Your rewards may not cover all your expenses, but they can certainly help you spend more.

After all, the holidays aren't about how much you spend—they're about being thoughtful and considerate with your time and money. By planning ahead, setting limits, and adopting smart spending strategies, you can enjoy the season without starting the New Year in debt.