#1 Know where you are financially
Before you spend a dollar or swipe your credit card even once for Christmas gifts, you need to know what you can truly afford. Looking at your budget can be stressful. Many families that are living paycheck to paycheck are constantly shifting money around and just paying what must be paid in that moment rather than getting a grip on the big picture. Now is the time to do this. Get out your bills, your pay stubs and your debit card statement so you can see what you're spending. Figure out how much you bring home in pay, how much your bills are and where you can cut back to have holiday money.
#2 Come up with a holidays gift budget
Make a list of everyone you plan to gift and jot down some gift ideas and approximate dollar amounts. Total it up and see how it compares to your disposable income. If it exceeds what you know you should spend, you need to come up with some options. Pare the list of gifts you have to purchase down to those you absolutely must gift. And for those you do need to gift, don't let guilt push you to purchase more than you can afford. Instead, think about other ways to show you care like offering services, making home baked goods or crafts. Massage your list until it aligns with your budget.
#3 Get creative to address any shortfall
If you clearly don't have enough money to meet your holiday needs, you have a few choices. One is credit card spending or borrowing – this is a bad option that will make life worse later. Second is cutting back on how many gifts you give or how much you spend on each gift. Third is to try and scrape up some extra cash. Hold an impromptu garage sale, throw unneeded items on Craigslist or look for some seasonal work to generate some green. It may be a hardship to work extra hours in the busy holiday season, but it's better than piling on more debt you'll have to face in the New Year.
#4 See if you can get others to cut back
It can be awkward if everyone at your workplace is swapping gifts with each other and you're the lone hold out. Suggest a name draw or a white elephant exchange so you can buy just one gift rather than having to gift everyone at the office. For family outside of your immediate family, a name draw can also be a great idea so everyone gets a gift but no one has to fork out a pile of cash. Gifts for immediate family, particularly your kids, are going to be a higher priority and that's okay. For family, coupons for favors and services can be very meaningful but may not be as welcome at work.
#5 Prioritize your financial well-being
It's really easy to let generosity (or guilt) get the better of you at Christmas and lead you to over-buy. You will regret digging yourself into a financial hole. And psychological studies have shown that giving kids too many gifts is unhealthy for them. Instead of going for a quantity of gifts, go for quality and choose items they really want rather than trying to achieve a certain number of gifts or amassing a pile of a certain size. Your best bet is to do what you must to not accumulate debt for Christmas. This means cash only, no credit cards, shop the sales and set a firm budget that you stick to. You'll have a happier New Year if you do.