Avoiding Debt Hangover: 4 Smart Ways to Manage Holiday Expenses

The holidays bring joy, family togetherness, and the spirit of giving.

But for many, they also bring financial stress. Between travel, gifts, and festive meals, it’s easy to overspend and head into the new year with more debt than you planned. In a 2024 survey, 36% of Americans went into holiday debt, with average new balances around $1,181—up from $1,028 in 2023.

Budgeting for the holidays can feel overwhelming, but with a clear strategy, you can enjoy the season without putting your long-term financial goals at risk.

Here are four smart ways to manage your holiday expenses:

1. Set a Realistic Holiday Budget

Holiday planning should start by deciding how much you and your family can truly afford to spend this season. That number should fit comfortably within your monthly budget and not come at the expense of essentials like rent, mortgage, utilities, or retirement savings. Once you’ve identified your spending limit, break it down into categories such as gifts, travel, food, and decorations.

Tracking expenses is equally important. Use a budgeting app, a simple spreadsheet, or even a notepad to keep tabs on your spending. This will help you see where your money is going and whether you’re staying within your limits.

To make your budget more effective, consider setting caps on each gift or agreeing with family members on a spending limit. Some families adopt gift exchanges (such as Secret Santa) or grab-bag traditions, which allow everyone to participate in giving without splurging on too many gifts. This can be a fun way that reduces both financial pressure and the stress of endless shopping.

Creating a holiday budget isn’t about cutting the joy out of the holidays—it’s about making sure the joy doesn’t come with financial regret.

2. Use Credit Wisely

Credit cards are convenient, but they can quickly lead to costly debt if not used responsibly.

APRs on credit cards are hovering near record highs— around 21% across all accounts so far in 2025—so carried balances get expensive fast.

Overspending in December could mean paying for the holidays well into the following summer if you’re not careful.

Consider these strategies

• • • Pay with cash or a debit card when possible to limit overspending.
    • If you use credit, stick to one card to simplify tracking and reduce the temptation to spend more.
    • Pay your balance in full each month to avoid interest charges.
    • If you need to spread out payments, look for a card with a 0% introductory APR, but have a payoff plan in place before the promotional period ends.
    • Avoid opening new credit accounts for holiday discounts, as these can lead to higher debt and may affect your credit score.

Buy Now, Pay Later Services

Some shoppers may also think about using Buy Now, Pay Later (BNPL) services as an alternative to credit card shopping. While these plans may be appealing, it’s important to approach with caution. Missing a payment can lead to late fees, and juggling multiple plans can quickly become confusing. Unlike credit cards, these services may offer fewer protections for returns or disputes, and some may report missed payments to credit bureaus. It’s best to treat it with the same discipline as any other form of credit.

Remember, credit can be a useful tool, but it should support your holiday plans, not undermine your financial health. Using it strategically ensures that the new year begins with financial confidence rather than regret.

3. Prioritize Meaningful Spending

Not every holiday tradition has to come with a big price tag. Focus your spending on what matters most to you and your family. This could mean scaling back on lavish gifts in favor of experiences or handmade presents. It might mean hosting a potluck dinner instead of covering every dish yourself.

Also, consider making a list before you shop. Having a plan can help you avoid impulse purchases, which are one of the biggest drivers of overspending during the holidays. Retailers are skilled at marketing, especially around Black Friday and Cyber Monday, so having clear priorities will help you resist buying things you don’t need.

By prioritizing what’s meaningful, you’ll stretch your dollars further and avoid unnecessary debt. Try shifting the focus from material items to experiences: family game nights, shared meals, or community activities often provide more lasting joy than expensive gifts.

The holiday time can also be a great way to teach children about thoughtful, intentional giving. Setting reasonable spending expectations can set them up for healthier financial habits in the future.

4. Plan for Next Year

A PwC survey shows consumers plan to cut 2025 holiday spending by approximately 5%, signaling tighter budgets and the need to prioritize.

One of the best ways to manage holiday spending is to think ahead. Start setting aside a small amount each month for next year’s holidays. By spreading out the cost over 12 months, you’ll avoid the financial squeeze that often comes at the end of the year.

Review where you overspent this year and adjust for next year. Did travel cost more than expected? Did gift-giving creep past your budget? These insights will help you create a more realistic plan moving forward. Building a dedicated holiday fund—even if it’s just a separate savings account—can help you stay disciplined.

The earlier you start preparing, the easier it will be to keep holiday expenses under control. Some people choose to set up automatic transfers into a holiday savings account, while others use bonuses, tax refunds, or extra income throughout the year to build their fund. By the time the season arrives, you’ll have money set aside specifically for holiday spending, reducing the temptation to rely on credit.

Conclusion

The holidays should be about connection, celebration, and joy—not about entering the new year with financial stress. A thoughtful approach allows you to celebrate generously while keeping your bigger financial goals intact.

“By taking proactive steps now, you can keep your spending under control, avoid unnecessary debt, and still create lasting memories with your loved ones,” says David Beckerman, Senior Vice President, Investments at David Lerner Associates, Inc.

“The key is finding balance—celebrating the season while staying mindful of your financial future.”

If you’re unsure how holiday spending fits into your broader financial picture, connect with an investment counselor at David Lerner Associates. Together, you can review your current strategy, explore ways to balance enjoying today while preparing for tomorrow, and set yourself up for a financially healthy start to the new year.

 

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