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6 Tips for a Debt-Free Holiday

Oct 27, 2021 5 min read David Rodeck

Key takeaways

  • Planning could be tricky this year, with many looking to splurge post-vaccination.
  • Some simple spending strategies can help offset higher costs for travel and gifts.
  • Rewards credit cards could be a valuable tool, especially for earning free travel.


Sticking to your holiday budget is never easy, but 2021 could prove particularly difficult. In the wake of what may have felt like a lost holiday season, the COVID-19 vaccines might have you more comfortable about traveling and seeing family again. As exciting as that prospect is, it’s also risky for your budget: You might be tempted to overspend on decorations, trips and gifts to make up for 2020.

If you’re looking to catch up on festive cheer, these tips can help you have a great time while staying debt-free.



  1. 1. Develop a budget (and stick to it)

    The holidays usually mean extra spending outside your normal monthly budget. To stay debt free, that money will have to come from somewhere. During the pandemic, Americans were spending more on takeout, self-care products and home renovations.1 Review your spending for the past six months, and see where you can cut back in these areas (at least during the holiday season).

    Then, before you start shopping, set a number for how much you’d like to spend—and don’t budge from it. Hide your credit cards if they’re starting to call your name.


  2. 2. Watch out for higher travel expenses

    If you plan on traveling for the holidays this year, you’re not alone. Even with the ongoing pandemic, Americans are booking holiday travel in record numbers. Priceline found that hotel prices are already 14% higher than in the 2019 holiday season—and they could rise further as more people book last-minute trips.2 Rental car demand is also soaring, made even worse by a lack of vehicle inventory.3

    If you’re on a budget, carefully consider whether this holiday season is really the best time for a major vacation. Could you postpone the trip to when the airways and roads are less hectic? If you do plan to travel, consider booking sooner rather than later to avoid further price increases.


  3. 3. Expect a harder search for deals

    The 2020 holiday season was a great time to find gift deals as retailers were eager to make sales when most people weren’t spending. Forecasters expect the 2021 holiday spending to be at least 7% higher compared to last year, according to forecasts from Bain, Deloitte and Mastercard.4 At the same time, supply chain issues and a lack of staff mean retailers are having trouble keeping shelves stocked.

    Consider starting your holiday shopping early so if you do find a good deal, you can snap it up. Remember that many retailers still offer price matching, so if you find a better price after you purchase, you may be able to get a partial refund for the difference. Amazon also offers a tool where you can check prices with other vendors. Any savings you find can help fund the rest of your holiday budget.


  4. 4. Consider using credit card rewards

    Credit card rewards could be your secret ally in avoiding debt this holiday season. If you’d like to take a trip, the travel rewards cards you couldn’t use in 2020 could finally show their value. You could redeem your points toward hotel nights or flights. Some cards also offer incentives when you first sign up—sometimes enough for a round-trip flight. If you’re looking to travel, that alone might make it a good time to take out a new card.

    On the other hand, if you don’t plan to travel this holiday season, consider redeeming your points for gift cards. These could be nice presents by themselves, or you could use them to pay for gift shopping. Either way, you cover holiday spending without going into your pocket.


  5. 5. Keep kids’ gift expectations in check

    Your children might be expecting a real haul this year, especially if they’re catching up with family members they couldn’t see in 2020. Try to manage their expectations and focus on smaller, more meaningful gifts. One personal finance blogger suggests setting a four-gift limit, with this “formula” in mind when shopping for kids:

    • One thing they really want
    • One thing they really need
    • Something special for them to wear
    • Something special for them to read


  6. This applies to all your young family members, children and grandchildren. Avoid breaking the bank for them. It might sound corny, but the real gift—especially this year—is being able to spend time together again.


  7. 6. Check for free activities

    You don’t have to spend a fortune on holiday activities, like high-priced tickets to “The Nutcracker.”* Check to see what free or low-cost events are happening in your area. There could be holiday concerts and tree lighting events—or something as simple as a walk around the neighborhood to check out the decorations. Not only will these activities save you money, but they’re usually outdoors and socially distanced.

    *Unless you can afford it; these days the performing arts need all the help we can muster.


What you can do next

Set a realistic holiday budget based on what you can afford this year, especially for travel and gifts. Start researching (and booking) deals now to lock in rates before the holiday mob.


  1. 1 “Sixty Percent of Americans Report That the Pandemic Year Forever Changed How They Budget and Spend Their Money in New Survey Commissioned by Slickdeals,” Cision PR Newswire, March 12, 2021 (prnewswire.com/news-releases/sixty-percent-of-americans-report-that-the-pandemic-year-forever-changed-how-they-budget-and-spend-their-money-in-new-survey-commissioned-by-slickdeals-301246391.html)
  2. 2 Monica Buchanan Pitrelli, “People Are Booking Christmas Vacations Earlier Than Ever Before,” CNBC, Sept.10, 2021 (cnbc.com/2021/09/10/people-are-booking-christmas-vacations-earlier-than-ever-before.html)
  3. 3 Aaron Hurd and Dia Adams, “Car Rental Prices Are Up. What Are The Alternatives?,” Forbes, July 7, 2021
  4. 4 Melissa Repko and Lauren Thomas, “Fewer Deals and Shipping Delays: Here Are Some Early Predictions for the Holiday Season,” CNBC, Sept. 14, 2021 (cnbc.com/2021/09/14/holiday-shopping-2021-early-predictions-call-for-fewer-deals-delays.html)


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