How to Recover When Your Holiday Budget Is Blown

If you’ve already stashed away gifts in your workshop for holiday 2023, you’re not alone: The National Retail Federation finds that 43 percent of consumers start their holiday shopping before November—with the top reason being a desire to spread out their budget. However, the earlier you shop, the more you might be liable to overspend as you discover more and more “perfect” items.

In fact, as the big shopping days of Black Friday and Cyber Monday approach, you may be concerned that your holiday spending is already out of control. If so, you’re likely not alone:  Science and the retail industry conspire to get you to spend as much as possible, says Seattle-based money coach Mikelann Valterra.

“Shopping can send a shot of the feel-good chemical dopamine to your brain—the same chemical that floods your brain when you bite into a piece of chocolate cake,” Valterra says. Meanwhile, ecommerce sites draw you in by touting amazing deals to create a sense of urgency and brick-and-mortar stores feature friendly salespeople and appealing displays.

But even if you have spent more than you planned to for the holidays, that doesn’t mean you’re doomed to start the new year with a budget hangover. Here's a four-part plan to get your spending back on track. 

Step 1: Face the damage

Your first step is to figure out exactly where you are: Pull out your credit card and bank statements to track what recent expenditures count as holiday spending. Depressed by the figure? There's actually a bright side, says Valterra.

“Pat yourself on the back for how much [gift shopping] you’ve finished when others might be staring at a long to-do list,” she says. You also may have gotten some great bargains along the way. 

Step 2: Determine what you need

Now that you know exactly how much you’ve spent, make a list of expenses you still have coming. This includes gifts, as well as money for travel or entertainment plans. 

Brainstorm ways to cover what remains without having to spend more. Instead of buying new clothes for a holiday event, shop your closet. If you're hosting a party, make it a potluck or cocktails only. 

As for gift-giving, rely on some mind tricks. Show up at the mall with a list and really focus on knocking out the remaining items without staying too long. After 90 minutes or so, people become more prone to buying stuff, Valterra says. If you’re buying online, limit yourself to two or three websites and set a timer for how much time you believe you’ll need to complete your purchases.

Or, put a 24-hour hold on anything in your online cart. “The first time you see a great deal or stumble on a new site, it gives you that brain rush, but the second time you go, it’s not as juicy,” Valterra says. “The more rational part of your brain kicks in after 24 hours.”  

If you’re truly out of cash, don’t go back to the stores. “You won’t see the gorgeous wreath that would complete your holiday décor,” Valterra says. “You’ll make do with what you have.”

Step 3: Get a grip on gifts 

Take advantage of looser exchange and return policies this time of year. Consider exchanging some items you’ve already bought for something that costs less. 

See if there are any names on your gift list you can cut. After all, just because someone gave you a gift last year doesn’t mean you need to reciprocate. You also can consider stretching out the giving by wrapping up an “I owe you” for a movie with your friend in January or planning a summer expedition to the children’s museum with your niece.

To help alleviate a direct hit to your wallet, cash in any available credit card rewards points for a purchase. Search your home to see if you have any unused gift cards hanging around and take advantage of the balances to “buy” a present without spending a dime. Or try a gift card swap site where you can get gift cards at a discount and use them to buy what you need.

You can also enlist your posse to establish new, gift-free traditions. If your group of friends usually hits up a fancy restaurant or concert, suggest that everyone get together for a service activity this year, such as wrapping presents for a children's charity or working in a food pantry. 

If the overspending is on gifts for your kids, Valterra suggests this stealth maneuver. “Ask them to share the top three things they loved about the holidays from the previous year. Often, their answers will include things like making cookies or looking at lights, not gifts,” she says. Then you can make sure to schedule these activities into your holiday plans. “Doing so will take the focus off gifts (especially if you see you can’t afford to buy more) and keep everyone happy.” 

Step 4: Make next year better

Sure, you’re going to be smarter next year, but you don’t have to wait until next year’s holiday season to try again. Start cutting back on overzealous giving for any occasion, such as birthdays, graduations and weddings. If you have a special talent, consider making that your go-to gift. For example, maybe you could knit a baby blanket for the neighbor, a scarf in a grad’s school colors or create throw pillows for your friend’s new home.

Then consider setting up a savings account just for holiday plans or other regular expenses that you know come up a few times a year. That way, you'll already have money set aside the next time a party rolls around. To do this, figure out how much you typically spend for the event and then break that down into manageable monthly amounts you can set aside. The goal is to have enough so that come next December, your holiday is already paid for.