Holiday Spending: 6 Tips to Stay on Budget and Avoid Financial Stress

The holidays are about creating memories with the people you care about most. But they’re also one of the easiest times of year to overspend. Wanting to see smiles on the faces of your nearest and dearest can turn even a disciplined saver into a seasonal splurger.

And between gifts, travel, entertaining, charitable giving, and countless smaller expenses, holiday spending can create financial stress long before the season even arrives.

The good news is that you don’t have to choose between enjoying the holidays and staying on track financially. With a little planning and some clear expectations, it’s possible to celebrate in a way that feels meaningful without derailing your broader financial goals.

1. Start with a holiday spending plan

When most people think about holiday spending, they think about gifts. But gifts are only one piece of the puzzle.

Nerdwallet’s 2025 Holiday Spending Report found that holiday shoppers planned to spend $1,107 on average, $182 more than the previous year. This increased to an average of $2,586 for those planning to travel during the holiday season.

Identifying key expenses early can help you start the holiday season on a high note.

Calculate your total holiday costs

Before setting a budget, estimate how much you may spend on the following:

• Gifts
• Travel and transportation
• Holiday meals and hosting
• Decorations
• Charitable donations
• Tips for service providers
• Seasonal events and activities

Looking at the full picture can help reduce the risk of surprise expenses later in the season.

Set a realistic holiday budget

A holiday budget should fit within your overall financial plan.

One useful starting point is reviewing what you spent last year and asking whether that amount still makes sense today. If your income, savings goals, or financial priorities have changed, your holiday spending may need to change as well.

The goal is to decide intentionally where your money will have the greatest impact so you can enjoy the season without creating financial stress that follows you into the new year.

Create guardrails before the season starts

Once you’ve established your holiday budget, create boundaries that make it easier to stick to.

Consider:

• Building detailed shopping lists before major sales events.
• Setting spending limits for each recipient.
• Tracking purchases as you make them.
• Using cash or debit cards for certain purchases.
• Avoiding impulse purchases that weren’t part of your original plan.

The earlier you create guardrails, the easier it is to avoid overspending.

2. Set expectations early with family and friends

One of the biggest sources of holiday stress is the expectations surrounding what you will spend on gifts.

Having honest conversations early with your partner or family members can prevent misunderstandings and help everyone focus on what matters most.

If you’re planning to spend less this year, let people know ahead of time.

Rather than framing the discussion as cutting back, consider positioning it as an opportunity to celebrate differently. You might explain that you’re focusing on experiences, saving for another financial goal, or simply trying to be more intentional with your spending this year.

Consider alternatives to expensive gift exchanges

Gift giving is often the largest holiday expense, but there are plenty of ways to make it more manageable without making it less meaningful.

Here are some ideas:

• Secret Santa exchanges
• White elephant gift exchanges
• Family spending caps
• Group gifts
• Homemade gifts
• Service-based gifts
• Limiting gifts to children

For larger families, even a simple name-drawing system can dramatically reduce costs while preserving the fun of exchanging gifts.

Focus on traditions and experiences

Many of our favorite holiday memories aren’t tied to expensive gifts.

Activities such as baking together, watching your favorite movies, volunteering, decorating the house, or hosting a game night can create meaningful traditions at a fraction of the cost.

When expectations shift from spending money to spending time together, the holidays often become less stressful and more memorable.

3. Smart ways to stretch your holiday budget

Even with a budget in place, the holidays can test your discipline. Between limited-time sales, social events, and last-minute gift ideas, it’s easy for spending to creep higher than planned. The good news is that a few intentional habits can help you get more value from every dollar and keep your holiday budget on track.

Shop intentionally

Holiday promotions can create pressure to buy quickly, but intentional shopping often saves more money than chasing every deal. Northwestern Mutual’s 2025 Consumer Sentiment Survey found that families who spend intentionally while avoiding impulse buys feel more in control of their finances, regardless of what’s happening in the larger economy.

Before making a purchase:

• Compare prices across retailers.
• Stick to your shopping list.
• Wait before making impulse purchases.
• Focus on value rather than discounts alone.

A deal isn’t really a deal if it causes you to spend money you hadn’t planned to spend.

Look for easy savings opportunities

You may already have tools available that can help lower holiday costs, such as:

• Credit card rewards points.
• Cashback programs.
• Store loyalty discounts.
• Promotional offers.
• Digital coupons.

Used strategically, these savings can help stretch your holiday budget without changing your plans.

4. What to do if your holiday spending is off track

Even with a budget, overspending can happen. In fact, Nerdwallet’s 2025 Holiday Spending Report found that nearly a third (31 percent) of survey respondents were still carrying debt from the previous holiday season. Here are two ways to get back on track:

Recognize the warning signs

You may need to reevaluate your plan if you’re:

• Frequently exceeding spending limits.
• Relying heavily on credit cards.
• Making purchases without checking account balances.
• Dipping into money earmarked for other goals.
• Constantly making “exceptions” to your budget.

These small decisions can add up quickly.

Pause and reassess

If you notice your spending is higher than expected, stop and review your remaining holiday purchases.

You may decide to:

• Reduce gift spending.
• Simplify travel plans.
• Skip nonessential purchases.
• Reprioritize your shopping list.

Adjusting early can prevent a temporary setback from becoming a larger financial problem.

5. How to recover if you’ve already blown your holiday budget

Overspending during the holidays is not unusual, so don’t panic. The most important thing is acknowledging the situation and creating a plan. Ignoring balances or delaying payments can allow interest charges to compound and make recovery more difficult.

Create a post-holiday repayment plan

Start by calculating how much debt you’ve built and identifying interest rates associated with each balance.

Then create a realistic payoff timeline, prioritizing high-interest debt whenever possible.

Having a defined strategy can help you regain control and avoid carrying holiday debt longer than necessary.

6. Use this year’s experience to prepare for next year

After the holidays, spend a few minutes evaluating the season.

Ask yourself:

• Which expenses exceeded expectations?
• Where did I successfully save money?
• Which costs surprised me?
• Which traditions delivered the most value?

These lessons can make next year’s planning easier and more accurate.

Start a holiday savings fund

One of the easiest ways to reduce future holiday stress is to save throughout the year.

Setting aside a small amount each month in a dedicated high-yield savings account can help spread costs across the year instead of concentrating them in a few weeks.

By next holiday season, you’ll have a clearer spending plan and potentially less need to rely on credit.

A better holiday season starts with a plan

The holidays don’t have to be defined by overspending or financial stress. A realistic budget, clear expectations, and thoughtful spending decisions can help you celebrate in a way that reflects both your values and your financial goals.

Your Northwestern Mutual financial advisor can help you understand how seasonal spending fits into your broader financial plan and identify strategies that help you enjoy today’s moments while continuing to make progress toward tomorrow’s goals.

Frequently Asked Questions

What is a normal budget for the holidays?

There’s no standard amount that everyone should spend during the holidays. A reasonable holiday budget is one that fits comfortably within your overall financial picture and allows you to enjoy the season without taking on debt or compromising other goals, such as saving, investing, or paying down existing obligations.

Instead of comparing your spending to friends, family, or social media expectations, focus on what works for your household. The best holiday budget is one that aligns with your priorities and lets you celebrate without carrying financial stress into the new year.

How can I do Christmas on a tight budget?

A memorable Christmas doesn’t have to be an expensive one. If money is tight this year, start by identifying the traditions that matter most to you and your family. You may decide that gathering together for a special meal, attending a holiday event, or spending time with loved ones is more meaningful than buying dozens of gifts.

One of the biggest Christmas expenses is often gift giving, especially for large families. Consider setting spending limits, organizing a Secret Santa exchange, or focusing gifts on children rather than exchanging presents with every adult. These approaches can reduce costs while preserving the spirit of giving.

You can also look for ways to simplify other holiday expenses. Homemade treats, potluck gatherings, family movie nights, and favorite holiday traditions often create lasting memories without adding significant costs. The goal isn’t to spend as little as possible—it’s to spend intentionally on the experiences and traditions that mean the most to you.

What is a thoughtful but inexpensive gift?

A thoughtful gift doesn’t have to come with a high price tag. Some of the most meaningful gifts reflect a person’s interests, hobbies or needs, such as a favorite book, homemade baked goods, a framed photo, or a handwritten note expressing appreciation.

Acts of service can be equally meaningful. Offering help with babysitting, pet care, household projects, or planning a shared experience can show genuine care while keeping costs low. In many cases, a personal touch matters more than the amount spent.