It’s the season for giving, but that doesn’t mean you should be left with nothing in the bank. 

While shoppers are expected to spend 7% less during the holidays in 2020 compared to 2019 due to the Covid-19 pandemic, they’re still on track to spend $1,387 per household throughout the holiday season, including $487 on gifts and gift cards. Holiday shopping also often means that consumers take on more debt to pay for gifts. In 2019, roughly 40% of Americans said that they pay for holiday gifts with a credit card, according to recent research. And 25% of respondents said that they were still paying off holiday debt from the previous year. 

So if you have a long list of gifts to purchase for family and friends, Stash has some budgeting tips that can help ensure that you don’t end up draining your savings, or drowning in debt this month and in the new year.

Make a holiday savings plan

It’s best to start planning for the holidays as soon as possible. In anticipation of this time of year, you may want to put a small amount of money away each month to save for holiday spending in the weeks and months beforehand. In your Stash account, you can also create a partition specifically for the holidays.1 Put a little aside each month until you’re ready to go shopping.

Make a holiday budget and check it twice

Before you do any holiday spending or any spending for that matter, build a budget if you don’t already have one. Consider using the 50-30-20 budget rule, which puts 50% of your money to go toward essential, fixed expenses, 30% toward variable, nonessential expenses, and 20% toward savings and investing. 

To create this budget, you need to figure out your gross income, or how much money you have coming in each month once taxes and other deductions are made. Then you can split up your expenses accordingly. Your expenses and priorities might shift during the holiday season, so you may want to adjust your personal budgeting percentages for the season. For example, you might put less money in savings so you can buy the gifts you need to get. The most important thing is that you’re not spending more money than you have incoming each month. 

Once you have your budget on hand, figure out the total amount you can afford to spend on gifts. Certified Financial Planner (CFP) Jared Andreoli from Simplicity Financial in Milwaukee, Wisconsin suggests making a list of all the people you need to shop for, so you can have a rough idea of what you can spend per person, and where you can make cuts. “This can be really hard, but trying to get out of debt because you overspent at the holidays is even harder,” says Andreoli.

Take advantage of sales where you can

Maybe you want to get a specific toy for one of your kids or a new computer for your spouse. If you do have a list of particular items, do some research on when those items might go on sale at different stores. 

Although Black Friday and Cyber Monday are typically considered the biggest days for holiday sales, some experts have suggested that the 2020 sale season will extend closer to the holidays as retailers try to recover from a decline in sales due to the pandemic. You can use third-party apps and rebate providers, such as Honey, RetailMeNot, or Rakuten, to find extra discounts or cashback on purchases.2

Use cash or a rewards card

One way to stay on top of your spending is to use cash, says Danielle Barak, a financial advisor from financial planning firm Northwestern Mutual in Orlando, Florida. “If you are shopping in person, take out the amount you are comfortable with spending, in cash and only use this money to make holiday purchases,” says Barak. This strategy is the basis of the envelope method of budgeting, where you put cash in envelopes for different purposes to help stay on top of spending. As you see the cash disappearing, you’re likely to get more careful about spending.

If you need to use a card, consider using a debit card. Debit cards pull funds directly from your checking account, which could help you be more careful with your spending. In contrast, a credit card purchase is essentially a small, short-term loan for purchases. The available balance or credit limit on your credit card is not your money; it represents how much money the credit card company and your bank are willing to lend you. In return for using the credit limit on your credit card, you must pay interest on your purchases, after a grace period of about one month.

Consider a debit card that earns rewards or cashback points when you’re buying gifts. By using a card that earns rewards, you can maximize your spending, especially if you’re doing more spending during the holidays than usually do. 

Consider using your Stash debit card when you’re shopping so that you can earn rewards without accruing debt as you do with a credit card. When you use Stash’s Stock-Back® card3, which is a debit card, Stash will give you a percentage of each purchase back as stock.4 And at certain retailers each month, Stash may have promotions giving a higher percentage on purchases.5

Only take on debt that you can repay and have a repayment plan

If you do plan to use a credit card to buy gifts, keep track of how much money you’re spending. Barak recommends writing down your expenditures and subtracting from your allotted budget to see what you have left over, and what you can afford. 

Don’t put something on your credit card if you can’t afford to pay for it with your monthly income. Remember that when you put something on a credit card this month, you should be certain that you’ll be able to pay it off next month when you receive the bill. 

Twenty-five percent of people mistakenly believe that carrying a balance on a credit card helps them financially, according to some market research. But it actually doesn’t help. Paying off your credit card bill each month likely saves you money, since you’ll avoid accumulating interest on unpaid balances.

Stay on track with your other financial goals

Even if you have to make changes in your budget for the holiday season, try to stay on track with your larger financial plan. If you know that you won’t be able to save much in the next month, for example, plan how you’ll increase contributions to your savings once the holidays are behind you. 

And if you can, try to at least make small contributions to your savings and investments. You can use Set Schedule in the Stash app to automate your smaller, but regular investments. Or schedule your investments to pick up again in the new year.

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