Holiday Overspending: How to Avoid Debt & Manage Your Budget

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The last thing you need is to overspend on the holidays and wind up in debt.

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Key points

• A recent survey reveals that most consumers have overspent on the holidays at some point.
• Knowing how to avoid falling into that trap could help you steer clear of debt.

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The holidays are a special time of the year -- and a potentially expensive one. From traveling to visiting loved ones to hosting meals, you can easily spend a small fortune on airfare and food alone. And let's not forget the tradition of giving out gifts -- something that could easily drain your bank account if you aren't careful.

In fact, when it comes to making it through the holiday season without any negative financial impact, being careful really is the key. But avoiding debt isn't easy. In a recent TD Bank survey, 69% of respondents say they've overspent on the holidays in the past. If you want to avoid doing that this year, take these essential steps.

1. Put yourself on a budget

Some people spend money during the holidays and hope their paychecks and savings can cover their purchases. A safer bet, though, is to take the opposite approach -- figure out what you can afford to spend first, and then make sure your purchases don't exceed the number you land on.

You may have different sources of cash available to spend during the holidays, including leftover money from your regular paycheck or a bonus you expect to come through in early December. Tally those numbers so you know what you're dealing with.

2. Set priorities for your spending

If you blow through your budget on gifts and decor, by the time you're ready to book your flight to see family, you may be out of funds. If you're insistent on making that trip, you may have no choice but to charge that flight on a credit card and hope you can pay it off in a reasonable amount of time.

Rather than put yourself in that situation, establish priorities so you know how to allocate the money in your budget. If the most important thing to you is getting to see family, your flight home is the thing you should spend money on first. Then, you can work your way down your list so if you're out of funds by the fifth or sixth line item, giving it up may not be such a big blow.

3. Make impulse buys more difficult to follow through on

A big reason many consumers overspend during the holidays is that they fall victim to impulse purchases in the course of their shopping. It's easy to be lured by sale signs during the holidays, especially when you don't have a shopping plan in place. But there are steps you can take to make impulse buys more difficult to complete.

First, if you've been known to fall victim to impulse purchases before, shop with cash. You'll lose some of the benefits credit cards offer, like cash back on the gifts you're buying, but you might prevent yourself from spending too much if you only bring enough money to the store to buy specific items on your list.

Next, limit the amount of time you spend shopping online. The less time you spend browsing, the less likely you'll be to stumble upon an item that suddenly catches your eye.

Overspending during the holidays is an easy trap to fall into -- but a dangerous one nonetheless, as it could lead the way to a heaping pile of debt. Follow these tips to avoid that fate -- and spare yourself the stress of starting off the new year with a credit card balance hanging over your head.

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