Inflation likely means fewer presents under the tree this year | How you can budget for the holiday

Samantha Kummerer Image
BySamantha Kummerer WTVD logo
Thursday, December 1, 2022
How to budget for the holiday amid inflation
EMBED <>More Videos

'Tis the season for shopping, but inflation is packing this holiday season with more headaches for shoppers.

'Tis the season for shopping, but inflation is packing this holiday season with more headaches for shoppers.

"So it went from a small budget, now whatever you want with the price tag it comes along with it," Mike Robertson said.

This Christmas will be the first for Robertson's son, so he said he is feeling the impacts of rising prices.

"Finding those sales, figuring out the best places, the best bang for your buck. That's really the best way to do it. Do everything early as possible. You know, that's what we've been doing," he said.

The average consumer is expected to spend around $1,455 this holiday, according to a study by Deloitte. This holiday price tag is pretty in line with last year, but consumers are expected to get fewer gifts in exchange. Whereas shoppers bought an average of 16 gifts last year, this year they will purchase around half of that at just nine gifts.

A little over 60% of that spending will be dedicated to gifts.

Forbes reported some of the highest price increases may be in jewelry (+31%), toys (+10.5%) and electronics (11%). Many top kitchen gadgets are also up about 8%.

Some experts say gift cards may be one option to help you avoid the rising cost of items and supply chain concerns. Gift cards also help keep you on budget.

One way Robertson and his family are saving money this year is pulling back on non-gift holiday items--like decorations.

"We didn't do as many lights and as many decorations around the house that we wanted to," he said.

Deloitte's study did find inflation is impacting lower-income families the hardest, as they plan to spend 25% more this season compared to wealthier consumers who actually are expected to cut spending by seven percent.

"People are still spending money and they're going to do it anyway. We just want to make sure that people understand that the purchases and the spending you make now -- especially if you use credit cards -- can affect long-term planning because you do have to pay it back," said Conley Perry who is a certified financial planner with Socratic Better Wealth.

Nerd Wallet found around a third of consumers who used a credit card last holiday season are still in debt.

Perry said to avoid this, opt for cash or make paying off the credit card a priority.

The best way to manage your finances this December is by making a budget and sticking to it.

"It's good to start early," Perry said. "If you can start early that's best because you can spread those expenses out for those gifts over a longer period of time instead of actually buying them all at once and having a big hit on your budget. It also allows you to price compare."

Another way to cut back is by prioritizing spending, which may mean opting out of Secret Santa, making the holiday party a potluck instead of hosting the big party, and sending e-cards instead of holiday cards through the mail.

Other tips include opting for homemade gifts or buying at resale shops, along with shopping local to avoid shipping costs.

Experts advise consumers to also take the time in December to budget for the upcoming year. Make sure your contribution to your retirement accounts is maxed out and use all the money in your HAS or FSA plan.

"You have to keep in mind that there's a bigger goal and you don't want to have a short period of time affect a longer period of time or affect your long-term goals. So be really careful on the spending and make sure you stay within your budget," Perry reminded people.