Piggy bank wearing a santa hat and large round glasses surrounded by wrapped gifts.

How to Avoid Holiday Overspending

By FINRA Investor Education Foundation Staff

Have you ever joked with friends or family following a get-together that you’d been “overserved”? It’s a tongue in cheek expression, acknowledging that you exceeded your prudent limit of food or drink (and are now paying the price), but blaming someone else. You’re not fooling anyone, of course, but it spares your pride to jokingly fault the host instead of yourself.

Knowing your limit is just as important in personal finances as it is at a holiday party. The average person will spend nearly $1,000 on holiday shopping this year, according to the National Retail Federation. But it is no joke to sober up in January and realize that you were “overserved” expenses and debt in the name of spreading holiday cheer.

Here are some tips for how to avoid overspending during the holidays without feeling like a Scrooge:

  • Rethink gifting. Keep in mind that material gifts are often valued less than gifts of time or toil. Do your parents need another item for their kitchen or curio cabinet? Would they be happier if you went for a visit, or helped them in the yard during spring cleanup? Would your kids enjoy a day fishing with Dad or going to a concert or sporting event with Mom? Looking back at our lives, we usually value experiences more than material goods.
  • Write out a spending plan. If you decide to buy gifts, determine before you go shopping which people truly belong on your list and how much you will spend on each gift. Stick to your plan.
  • Leave the credit cards at home. We consider purchases more carefully when we’re required to pull cash out of our wallet than when plunking down the plastic. If you do use plastic, keep a running tally of how much you spend so you don’t bust through your plan.

Once you have the spending side under control, consider investing in yourself. Any of these moves can stuff some more money into your accounts by year’s end:

  • Consider a charitable donation. If you make a contribution of cash, stock that has appreciated or other assets to a charitable organization, chances are good that you’ll be able to lower your 2017 adjusted gross income. How much you can deduct is determined by the class of asset you donate and the type of organization you give to, so consult IRS Tax Tip 2015-20 or your tax adviser for details.
  • Add to your employer-sponsored retirement plans. Contribute to a tax-advantaged retirement plan, such as the Thrift Savings Plan or a 401(k), to reduce the income exposed to federal and state income taxes. For the 2017 tax year, contributions are limited to $18,000 if you’re under age 50. Those 50 or older can contribute up to $24,000. Your employer sets the final date to receive your retirement plan contributions, but funds must be deposited within the current tax year, which ends December 31, 2017. 
  • Contribute to an IRA. You have until April 16, 2018, to limit the impact of federal and state income taxes by establishing or adding to a traditional Individual Retirement Account (IRA). The 2017 IRA contribution limit is $5,500 of your taxable income, but those 50 or older can contribute up to $6,500. Don’t forget that spouses who aren’t currently in the workplace may also contribute to an IRA. Money deposited into a Roth IRA won’t be exempted from taxes immediately, but it will enjoy tax-exempt growth. Roth IRAs can be a great way to get your money working for you. But be aware that tax-advantaged IRAs are subject to deduction limits, so plan carefully.
  • Use your FSA. Don’t forget about any balance remaining in your 2017 health care flexible spending account (FSA). Although the IRS amended the rules permitting an employer to allow carryover of up to $500, many plans are still “use it or lose it.” These plans require that FSA funds be exhausted by December 31. Other plans allow you to receive service under a 2017 FSA until March 2018, with a claims deadline of May 2018. Make sure you understand what your employer’s policy is, as it may have changed since last year. You are throwing away real money unless you use your FSA funds by your plan’s deadline. 

Know your spending limits, and fill up on saving opportunities. The FINRA Investor Education Foundation wishes you a prosperous new year!

For more information about everyday finances, visit SaveAndInvest.org.


Spending less is just the first part of a successful financial plan. Put away the money you saved on the holidays into a savings account for future expenses. Those with a savings plan are twice as likely to save successfully. Let Military Saves help you reach your savings and debt reduction goals. It all starts when you make a commitment to yourself to save.

TAKE THE PLEDGE


@FINRAFoundation gives tips on the #MilitarySaves blog on how to avoid overspending during the holidays: http://bit.ly/2D6cZJ5 

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