Tips to avoid a holiday spending hangover

It may be the most wonderful time of the year, but for many people, the financial aftermath of the holiday season is anything but merry. If a holiday overspending hangover is something you’re worried about this year, you’re not alone. This holiday season is expected to be the most expensive time of year for families and individuals across the country. 

So if you want to keep your long-term financial goals in mind while still getting the most out of the holidays, you’ve come to the right place. This guide will explain why overspending is so ridiculously easy and offer five practical tips to help you stay on point and on budget with your gift-giving game. 

The psychology of overspending for the holidays  

I’m going to hit you with a statistic, and I don’t want you to freak out, but the more we know, the more we can prepare ourselves for growth. Okay, here it is: 84% of millennials overspend on the holidays. Deep breaths if you feel targeted—we’re in this together. 

Another fun fact—if you spent more than $100 on gifts for someone last year, it was almost certainly on your spouse and/or children. Us humans just love to spoil those closest to us—but why? 

We overspend during the holidays because our brains are wired to thrive off of generosity. One 2017 study looked at what happens inside the human brain when people engage in generous behaviors compared to selfish ones. Researchers asked participants in one group to spend money on others over four weeks and asked participants in another group to spend money on themselves. 

The results? When they looked at images of participants’ brains, the generous group had one thing in common—they were happier, and their temporo-parietal junction (TPJ) lit up like Rudolph’s nose when they thought about spending money on others.  

Researchers believe TPJ plays a role in morality and moral-based decision-making. When activated, it stimulates the release of neurotransmitters like dopamine and oxytocin when we do something we perceive as morally good.  

In other words, the temptation to spend around the holidays comes from an evolutionary desire to be good and do right by others. So it’s no wonder budgeting flies out the window as soon as holiday decorations go up! And that’s why you need your prefrontal cortex (where logic and reasoning happen) to step in and remind your brain that you don’t have to blow your budget on holiday cheer. 

Five tips for avoiding a holiday spending hangover this year 

If you know how to avoid an eggnog hangover, you can avoid a holiday spending hangover—it’s all about mindfulness and moderation. Here’s what you should know if you want to steer clear of the overspending blues this year. 

Start by reviewing last year’s spending

The best place to start your holiday spending strategy is by revisiting what happened last year. It’s natural to feel anxious about digging through old financial statements—especially if you’ve newly started your journey to financial wellness. 

But cut past you a break. Look at those old spending habits without passing judgment on yourself. You’re a little wiser this year, and you can use any past holiday spending mistakes as lessons to make smarter spending decisions this holiday season. 

Some judgment-free reflection questions: 

• Did I have a budget for the holidays last year? Was it reasonable and helpful to my overall financial wellness goals? 
• How much did I spend on gifts? Was that too much, too little, or just right? 
• What unexpected holiday expenses did I have last year? 
• What other insights can I gain from looking at this information? 

Consider ALL of your holiday costs

If your holiday season is anything like mine, there are all sorts of hidden costs you might miss in your initial planning phase. Gathering with family and friends inevitably means traveling, going out to dinner, and buying an ugly sweater or two for special occasions. Think about how your holiday lifestyle figures into your overall monthly budget before fleshing out a sub-budget for gift purchases. 

Some possible spending categories: 

• Travel costs like gas, accommodations, or ticket expenses 
• Food and drink costs for cooking grand meals, baking cookies, or going out for special occasions 
• Attire costs for keeping up that matching PJ tradition or buying outfits for festivities 
• Holiday decor costs for lights, trees, poinsettias, ornaments, or giant inflatable reindeer 

• Charitable contributions and other [prosocial spending traditions] 

Create a sensible holiday budget

If you’re using the 50/30/20 budgeting method, Christmas spending fits under your “wants” category. No matter what budgeting method you use, resist the urge to use credit cards to bolster your holiday spending budget. High-interest debt from holiday shopping sprees is a huge reason people get holiday spending hangovers in the first place. 

Once you’ve accounted for all of your holiday expenses and figured out what you can realistically afford to spend this year, create a budget. Holiday budgets are like any other budget—they should be tailored to your lifestyle and income level, and they’re designed to help you stay on track to reach big long-term goals. 

Remember that there are tons of creative ways to show the people you love how much you care that can help support your budgetary goals. So rather than pass judgment on yourself about not spending exorbitant amounts of money, permit yourself to enjoy the holiday season for what it is—a time to spend quality time with people you love in ways that make sense for your specific financial goals. 

Make a gift list that supports your budget

Once you have your holiday budget in place, create a list of gifts for everyone on your list. This is the time to get creative and come up with ideas that fit into your financial framework. Homemade goods, monthly subscription boxes, and shared experiences are just a few gift ideas you can tailor to fit anyone on your list at any budget. 

With the constant pressure to perform and outdo brought on by social media, it’s easy to lose sight of the true spirit of giving. If you need help thinking of budget-friendly gifts for someone, try searching a shared memory for clues.  

For example, I have way too many cousins to buy stuff for every year, so last year, I decided to gift them each an orange (before you say anything, hear me out). 

When we were young, my grandparents hung stockings for each of the grandchildren. We couldn’t wait to dump out the candy and trinkets to get to the one thing that mattered most in those stockings—the orange at the bottom. 

Our grandma timed us as we peeled and ate the oranges as fast as we could. Some years, she’d throw in an extra element of challenge, like who could peel the skin into the fewest pieces. Then, after a winner had been declared, we could finally dig into our piles of chocolate holiday candy.  

That shared memory led me to order six ten-dollar orange-shaped ornaments for each of my cousins so they could remember those joyful times every year—and they were a huge hit! 

The point is, it’s truly the thought that counts, and you don’t have to spend a ton of money to spread holiday cheer! 

Be wary of discounts and impulse buys

Holiday discounts and special promotions can be highly tempting, especially when they appear limited in time or quantity. But marketers have studied human psychology for years to manipulate consumers into making purchases they don’t need.  

To avoid overspending on something just because you found a good deal, try using the 24-hour rule. It’s easy—just wait 24 hours before making a purchase to avoid giving into sales-y marketing tricks. 

Marketers also know how to snag your attention at the checkout line. Considering Americans spent over $300 per month on impulse buys in 2022, they’re getting better at it. But here’s the thing—now that you know marketers are trying to get your attention with impulse buys, you can be more mindful of the urge to give in.  

Again, the 24-hour rule can do wonders for curbing the desire for immediate rewards. So when your online shopping cart asks would you like to add any of these popular items to your cart, you’ll be able to resist the urge.  

The bottom line 

The holidays should be a special time of the year, and it’s possible to bring joy to the people you love without going into debt. So we hope you’ll join us in making healthy financial decisions that fit within your budget this year! 

Do you want to learn more about the relationship between your brain and your bank account? Julep is an app that combines financial wellness and financial psychology to help you improve your relationship with money. Learn more about how making small changes can help you reach big goals in 2023.