How to Save Money Now for Holiday Gifts

Seated man working on his budget in front of a computer.

The winter holidays are right around the corner, which means it's time to shop for gifts to give our loved ones. For some, however, holiday gift shopping can lead to a mountain of debt before the new year begins.

"Charge now, pay later" is a common approach for many consumers who use their credit cards to buy gifts. But "save now, spend later" may be a better plan for managing your holiday spending. If you want to avoid racking up credit card debt this holiday season, follow these six saving tips that can help you plan ahead to create a holiday gift fund.

1. Set a Time Frame and Goal

Decide how much you want to spend and how quickly you need to do it. If you can wait to start shopping until Thanksgiving, for example, you'll have more time to save.

Once you have a goal and timeline in place, decide on your savings strategies. Building your holiday fund fast will depend on implementing ways to make and save extra money, such as the remaining tips in this list.

2. Create a Holiday Sinking Fund

A sinking fund is a savings bucket that you deposit money into regularly, such as every time you get paid. Setting up a holiday sinking fund can help you begin putting aside money for your holiday gift savings goal now, and allow your savings to grow over time. That way, by the time you're ready to cross names off your holiday shopping list, you'll have a sizable fund to draw from.

To keep your holiday sinking fund separate from the rest of your money, try opening a high-yield savings account to house your gift-giving funds. Then, set up automatic transfers to funnel a set amount of each paycheck into your fund.

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3. Do a No-Spend Challenge

A no-spend challenge has you commit to spending no money on discretionary purchases (luxuries) for a period of time. When it's time to start holiday shopping at the end of this period—which may last six weeks or longer—your bank account should be more flush.

While a no-spend challenge can be too restrictive to sustain long term, it can be a great short-term solution for boosting your holiday savings account. Tracking your progress can motivate you to keep going and improve your odds of completing the challenge successfully.

4. Find a Side Gig Fast

Bringing in extra income can accelerate your timeline for reaching your savings goal. Fortunately, earning money quickly is not usually a problem in today's gig economy. For example, you might consider driving for a rideshare or food delivery company or even pet-sitting or walking dogs for a pet-care company.

Generally, one of the biggest advantages these side hustles offer is the flexibility to set your own hours and work when it's convenient. Fast payment is another valuable benefit. Uber, for example, offers Instant Pay which allows you to cash out up to five times per day.

5. Sell Your Stuff

While you may consider dropping your old items off at a thrift store, selling your stuff online can be a convenient way to make a lot of money. Whether you're selling an old lawn mower or fitness equipment, Facebook Marketplace, Craigslist and OfferUp can help you sell your items quickly without a fee.

If you're not comfortable meeting with a stranger, you might instead sell your items online on sites like Amazon and eBay. Consider selling certain items at specialty resale marketplaces. For example, if you have expensive brand-name clothing and accessories, like Louis Vuitton bags, Adidas and Jordan sneakers or Madewell jeans, they may sell quickly and for more money on Poshmark.

Experts recommend creating detailed listings with quality pictures and responding quickly to inquiries to sell your items faster. Throughout the process, be sure to take steps to protect your identity.

6. Earn More From Your Job

Bringing home more money from your job is another quick way to inject extra funds into your holiday savings account. Now might be the right time to ask for a pay raise, especially if your pay falls below the market rate for your job. Give your employer a specific pay amount that is high enough to provide some room to negotiate but isn't unreasonable.

Asking for a pay raise can be uncomfortable, but your odds of receiving it may be better than you think. According to a PayScale survey of over 160,000 workers, only 37% of respondents have asked their current employer for a raise. However, 70% of the workers who asked for a raise received one.

Additionally, volunteering for overtime or requesting more hours can provide extra dollars you can use to shop for your loved ones this holiday season. When you earn extra money from your job, you may be able to see the results as soon as your next paycheck.

How to Cut Back on Holiday Expenses

Use these actionable tips to help you stay on budget during the holiday season instead of getting wrapped up in holiday debt:

  • Make a list and check it twice. Before you begin your holiday shopping, create a list of essential people you genuinely want to buy gifts for, such as your closest friends and family. Remember, every gift you buy adds up, and spending can get out of hand if you're not purposeful with your shopping list. Instead of purchasing gifts for neighbors, distant relatives and past co-workers you no longer socialize with, consider giving them a thoughtful card instead.
  • Strategize your shopping times. You might save a lot of money by waiting for store sales and promotions, including Black Friday and Cyber Monday. Plan ahead by looking for flyers and advertisements from your favorite retailers to see if any sales offers line up with your gift list.
  • Use promotional codes and coupons. You'll have more money to add to your holiday savings account by paying less when you shop. When you're shopping online and see a promo code box on a site's checkout page, take a moment to search for a coupon code. You can also install browser extensions like Honey and Slickdeals that do the coupon searching for you while you shop.
  • Use your credit card rewards. If you regularly use credit cards, check your account to see if you have points or cash rewards you can redeem toward holiday shopping. Any rewards you can use for holiday shopping is money you don't have to use from your holiday savings account. Redemption rules vary by the credit card issuer, but you can usually redeem cash back as a statement credit or a direct deposit into your bank account.

Starting the New Year off Right

Saving money for holiday gift shopping can be better for your financial health than using your credit cards—especially if card purchases mean going into debt and paying interest charges well into the new year. By using your credit cards sparingly, or not at all, you're also controlling your credit utilization rate—the amount of available credit you're using—which could positively affect your credit score.

You can track your credit and utilization with free credit monitoring from Experian. You'll be able to check your credit report and score for free and receive alerts of any credit changes, including changes to your credit score. That can help you stay on top of your credit as we move into the new year.