The holidays are expensive in small, easy-to-miss ways: gifts, travel, food, decorations and the impulse buys in between. The fix is a plan made before you shop. This guide turns advice from the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) into a five-step holiday budget, plus what to do if the credit card bill arrives bigger than you hoped.
Key takeaways
- Set one realistic total for the season that covers gifts, travel, parties and decorations, then cap what you spend on each person.
- Write a gift list and follow a simple rule from the CFPB: if it is not on your list, do not buy it.
- Decide how you will pay. If you use a credit card, have a specific plan to pay the bill.
- Track what you spend as you go, so you do not get an unpleasant surprise.
- If you carry a balance, the FTC says to pay more than the minimum, and to call your creditors early if you cannot pay.
How do you set a holiday budget?
Start with your regular bills. The CFPB’s five-step plan says to cover regular expenses first and then subtract costs like hosting or travel, and what is left sets your gift money. It adds that it is best to start planning as early as possible. An older CFPB post suggests setting a realistic total for the season, estimating your income before the holidays, and setting aside a fixed amount from each paycheck. If you do not have a monthly budget yet, start with our guide to a realistic monthly budget.
What are the five steps?
| Step | What to do |
|---|---|
| 1. Set a budget | Cover regular expenses first, subtract travel and hosting, and use what is left for gifts. |
| 2. Make a list | Write down who you are buying for and review the list before shopping. Cap what you spend on each person. |
| 3. Get creative | Look for meaningful, low-cost gifts. The CFPB’s examples include homemade food mixes and a picture book of favorite recipes. |
| 4. Decide how to pay | Carry only the cash you plan to spend, or use a card with a plan to pay it off. |
| 5. Track your spending | Record purchases and check periodically that you are on track. |
Should you pay with cash or a credit card?
Both have trade-offs. The CFPB says carrying only the cash you plan to spend keeps you within budget, while a credit card offers more consumer protections, such as when an item arrives broken. If you use a card, the CFPB advises having a specific plan to pay the bill. An older CFPB post goes further and suggests leaving your credit cards at home unless you need one for a specific purchase and have a concrete plan to repay it. Whichever you choose, avoid impulse buys by writing down the item, where you saw it and its price, then checking it against your plan. During sales, watch out for fakes using our guide to spotting a fake Black Friday deal.
What are low-cost gift ideas?
- Draw names for a gift exchange instead of buying for everyone.
- Make something by hand.
- Offer your time, such as a cleaning or a home-cooked meal.
- If you buy gift cards, check for fees. The CFPB notes cards must disclose fees and that dormancy and inactivity fees are generally barred unless the card goes unused for a year.
What if you already overspent?
The FTC’s advice on paying off holiday credit card debt is practical:
- Pay more than the minimum. You can also make more than one payment a month. Paying only the minimum can cost much more in interest.
- Pay on time. Note the due date so late fees do not add to the cost.
- Review your budget. If the minimum is hard to make, look for spending to cut.
- Call early if you cannot pay. The FTC says to call your creditors as soon as possible, because they may offer a payment plan, and owing more than you can repay can hurt your credit rating.
Carrying a balance is costly because interest compounds, which we explain in how compound interest works. A cash cushion helps you avoid borrowing, as our guide to a practical emergency fund shows. If a surprise charge appears, you can check your credit report for free and dispute errors.
FAQ
When should I start a holiday budget? As early as possible, per the CFPB. Setting aside a fixed amount from each paycheck spreads the cost out.
How much should I spend on each person? There is no official figure. The CFPB suggests listing each person and capping what you will spend on them, based on your own total.
Is it better to use cash or a credit card? Cash can keep you within budget. A credit card offers more protections but needs a plan to pay it off, per the CFPB.
What should I do if I cannot pay my credit card bill? The FTC says to call your creditors as soon as possible, since they may offer a payment plan.
For more, visit our Personal Finance section.
Advice is from the CFPB’s archived posts A five-step spending plan to avoid holiday debt and Plan your spending to avoid holiday debt, and the FTC’s Paying off holiday credit card debt. The CFPB posts are archived and may be outdated, so check current card terms with your issuer. This is general information, not financial advice.
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