4 ways to rethink your 2020 holiday budget
This year has changed how many Americans save and spend. Take holiday budgets, for example. In 2019, the average American spent $942 on holiday gifts. In 2020, most Americans expect to spend far less—under $750.1
If you’re budgeting for holiday shopping, there are ways you can both give meaningful gifts and limit spending, if you need to. Plus, you can carry over the habits you put in place for holiday budgets this year to future gift-giving seasons. Here are four creative ways to get started.
1. Jot down a plan for 2020 holiday spending.
About one-fourth of all consumers haven’t created a holiday budget yet.2 Luckily, it’s never too late in the year to create a realistic budget to help balance saving and spending.
If you’ve saved more than expected this year by forgoing something like travel, for example, you may have unallocated funds that you can dedicate toward gifts. If not, calculate what you can spend without going into debt. Then challenge yourself to find gifts (and deals) for each person on your list within your holiday budget.
Where Americans overspent in 2020:2
Americans plan to spend $192 less on holiday gifts this year compared to 2019.1
2. Consider paring down your holiday budget.
In the past, many Americans haven’t relished the holiday season—they’ve dreaded it.3 Guilt caused them to overspend, and overspending led to all sorts of other negative emotions. In 2020, more people are experiencing higher levels of stress related to holiday spending, whether it’s from job loss or economic uncertainty.2
“We can choose how to respond to the environment we’re in,” Heather Winston, assistant director of financial advice and planning at Principal®, says. “The key is to not let stress cloud your judgment or the good decisions you’ve made this year.”
Since many of us are forgoing typical celebrations in favor of smaller, closer-to-home options due to health and safety concerns this year, you have an opportunity to start an open discussion about scaling back gift giving. For example, maybe you and your partner decide to forgo gifts and only purchase items for your kids.
The key is to not let stress cloud your judgment or the good decisions you’ve made this year.”
Heather Winston, assistant director of financial advice and planning
3. Get creative with gifts.
Remember the grade-school, handmade presents that your parents and grandparents treasured—and that you treasure from your own kids? Use that as inspiration as you trim your 2020 holiday spending and give gifts that are meaningful instead of expensive.
“Can you put your hobby to use, such as cooking, and deliver a meal to a friend?” Winston says. “In place of giving a gift to every member of your extended family, perhaps your group exchanges names instead.”
4. Give holiday gifts—next year.
We’re all looking forward to the day we can resume ordinary and extraordinary life rituals. So now may be the time to plan and budget for an event or future big celebrations. For example, maybe everyone in your gift-giving circle starts saving for a group trip to Portugal. Or perhaps you set aside funds for backyard upgrades (family cookout at your place next summer!).
It’s OK to acknowledge the disappointment and changes in a year that’s been filled with lots of challenges. But as Winston points out, “It’s also important to remember that by avoiding debt, you may be gifting yourself a more secure financial foundation and longer-term financial security.”
By avoiding debt, you may be gifting yourself a more secure financial foundation and longer-term financial security.”
- Make sure you’re paying yourself first. Have a retirement account with services through Principal? Log in to see where you stand.
- Feeling overwhelmed? Work with a financial professional who can help you create a more sustainable plan. If you don't have a financial professional, we can help you find one.
1 Gen Pop Survey, 2020 Holiday Spending and Financial Outlook (PDF), Principal
2 2020 Holiday Spending and Financial Outlook, Principal, November 2020
3 2019 Lending Tree Survey
The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other professionals on all matters pertaining to legal, tax, investment or accounting obligations and requirements.
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