6 Ways to Avoid a Financial Hangover

The festivity of December is replaced all too quickly by the due dates of January, when the bills from holiday spending and travel arrive. This kind of financial hangover can make the start of the year a little less joyful, but there are ways to prevent it.

“People often go into the holiday season without a plan. They might know who they want to give gifts to, but may not put numbers to it or think of what they want to spend overall, and that’s where people get into trouble,” says Rob Wurzburg, a Chicago, Illinois-based financial advisor at Forum Financial Management, a registered investment adviser.

To counteract the tendency to overspend, financial experts recommend the following six strategies:

Wurzburg urges people to start planning for holiday spending as soon as possible.

“The earlier you start planning, the better. Some people do a yearly budget in January,” he says.

While it’s too late for 2024, you can start planning for the 2025 holidays soon.

Setting aside money each month for the big end-of-year celebrations can reduce the risk of overspending or turning to debt, he adds.

Giving yourself a goal for the amount you want to save in time for the holiday season can help you stay on track, says Tiffany Murray, managing director at the Society for Financial Education and Professional Development, a nonprofit based in Alexandria, Virginia.

“Make sure it’s achievable and realistic within your budget,” she says.

Then, when you see an item on your list go on sale, you’ll have the money ready to make the purchase, even if it’s well before the start of the holiday shopping season.

Starting with the total amount you want to spend for the holidays — perhaps based on those previous savings and inclusive of gifts, travel, meals and any other costs — makes it easier to develop a game plan, says Brian Gawthrop, a certified financial planner in Kirkland, Washington and founder of Five Cedars Financial.

“Set a total spending budget before you make the list of people,” he says. Then you can prioritize and cut back on recipients, if needed.

“Almost everyone needs to revise the gifting list,” he says, because once you write it out in full, it is often pricier than anticipated.

Gawthrop suggests downsizing to more modest gifts or reducing the number of gifts per person. Often, making the gift more personal — such as framing a photo — makes it easier to spend less because it still feels special, he says. Some people might be happy with a card and handwritten note, perhaps paired with a modest charitable contribution.

“People want to express their love and how much they care for someone with a gift, and in today’s culture that can feel like a dollar amount translates to how much they care about you,” Gawthrop says.

“But I think a heartfelt card and something simple like, ‘I know you like fidgets and found this one,’ or ‘I’m glad I have you in my life,’ can show how much you mean to someone,” he says.

Gawthrop adds that recipients might be relieved to know you spent less.

“The last thing you want is to have someone open your expensive gift and then they feel awkward because it’s so expensive.”

The frenzy of sales and advertising during the holiday season, combined with the strong emotions the season evokes, can easily lead to overspending, Wurzburg says.

“Anything you can do to get yourself in a calmer state helps,” he says.

Calming techniques can include taking a break from shopping, going for a walk or reviewing your original spending plan.

Wurzburg also recommends simply staying home.

“Stick with online shopping so you don’t get sucked in,” he says.

Using cash to buy gifts helps minimize debt, since financing purchases with credit cards or other forms of debt can be expensive, says Tim Bauer, a CFP and founder of Evergreen Financial Group in Billings, Montana.

“It sounds old-fashioned, but if you don’t have it, don’t spend it,” he says, adding that many friends and family would rather not receive a gift than know it caused financial strain.

If you need to finance essential purchases, Wurzburg recommends a low- or no-interest method such as buy now, pay later, where shoppers can spread out their purchases over installments. That often means avoiding fees and interest, as long as you make the installment payments on time.

Still, he cautions against overcommitting yourself to future installment payments. He suggests scaling back instead.

“If you don’t have the funds today, are you hampering yourself in the future by overspending at the holidays?”

Connecting with a friend who is also aiming to stick to a budget this season can help keep you on track, Gawthrop says.

“Both of you can commit to sticking with your budget,” he says. You can check in with each other and even share what you’re buying.

Raising the topic with family members and encouraging everyone to stick with a budget — or the same spending limit per gift — can also help, Bauer says.

“People are scared and don’t want to talk about money, but defining how much to spend helps set expectations.”