Keep Holiday Spending Under Control

Take little steps to keep yourself from getting carried away and heading into the New Year with a debt hangover.

You've seen the footage on the news. You've been in the middle of it. You've stood in the vexing lines. You've circled for the elusive parking spots. Holiday shopping can be downright frenzied—and impulsive.

You don't necessarily need to go to the mall to feel the pressure and the urges—a half-hour with your laptop or tablet can put you in the same frame of mind.

How do you keep your spending under control, whether in a brick-and-mortar store or at home? Here are some tips.

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Make a plan.Most people do their holiday shopping without one. Set a dollar limit that you can spend per week – and try to spend less than that. As you plan your financial life (and check on your plan every few days), you may feel a little less stressed this holiday season. In fact, you might want to make two budgets – one for shopping, the other for entertaining.

Recognize the hidden costs. Holiday shopping isn't just a matter of price tags. When you don't visit brick-and-mortar retailers, you can avoid eating at the food court or coffee shop and spending gas money. Carpooling to the mall or taking public transit can help you save some cash.

On the other hand, when you shop online, there's always shipping to consider. It can make what is seemingly a bargain less so. Free or discounted shipping feels like you're getting a gift. Online retailers can also be very finicky about returns. Miss a deadline to return something to an online retailer (who hasn't?) and you may end up paying sizable return fees or just getting stuck with what you purchased.

Counteract those holiday expenses elsewhere in your budget. Maybe you spent a couple hundred more than you anticipated on that flat-screen TV. To offset your extra spending, pinpoint some areas where you can save elsewhere in your budget. Could you find cheaper auto insurance? Could you eat at home more this month? Could you drive less or cancel that gym membership or premium cable subscription?

If you do go overboard, strategize to attack the excess debt. You may want to pay off the smallest debt first, then the next smallest and so forth onto the largest. Or you may want to take the debt-stacking approach, whereby you pay down the debt with the highest interest rate first, then the one with the second highest interest rate, and so on.

With the latter method, you can potentially realize greater savings on interest charges. The advantage of the one strategy is the psychological high of quickly paying off a debt; the downside is the lingering, larger interest charges that come with the larger debts.

If you aren't vigilant, the holiday season could leave you with a "debt hangover" or contribute to a severe debt load you may be burdened with. According to the Federal Reserve, the average indebted U.S. household suffered with $15,593 in credit-card debt (opens in new tab) in August. That was a 2.36% increase from a year before.

If you feel like indulging yourself, indulge sensibly. Some people do give themselves holiday gifts, and the same logic you apply to giving to others should hold for yourself—whether it is a meal, a motorcycle or a spa package, don't break the bank with it.

Lastly, think about setting aside some holiday money for 2017. If your finances allow, how about putting $100 or $200 aside for next season? Invested in interest-bearing accounts (or elsewhere), that sum could even grow larger.

Greg O'Donnell's mission over the course of three decades has been to guide people to pursue and maintain a healthy financial life plan that accomplishes their goals.

Investment advice offered through O'Donnell Financial Services, LLC, a registered investment advisor. Securities offered through Independent Financial Group, LLC member FINRA/SIPC. Advisory assets may be custodied at TD Ameritrade. Insurance offered by Gregory C. O'Donnell, California Insurance #0B87978. Mortgage services are provided through American Pacific Mortgage Corporation licensed through the California Bureau of Real Estate #01215943 NMLS #1850. Gregory C. O'Donnell licensed by the California Bureau of Real Estate #00971579, NMLS #298004, not all applicants will qualify, rates subject to change. Know before you owe. Insurance offered by Gregory C. O'Donnell, California Insurance #0B87978. O'Donnell Financial Group, Inc. and O'Donnell Financial Services, LLC are not affiliated with Independent Financial Group, TD Ameritrade or American Pacific Mortgage Corporation.

This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Greg O'Donnell, Investment Adviser
Founder, O'Donnell Financial Group

Greg O'Donnell is the CEO and founder of O'Donnell Financial Group ( (opens in new tab)). His mission over the course of three decades has been to guide people to pursue and maintain a healthy financial life plan that accomplishes their goals.