10 Ways to Save Money this Holiday Season

Shop smart for the holidays—without going into debt


We'll spare you the Scrooge jokes and get right to the point: Given that you're already buying off-brand groceries and going out less frequently, holiday shopping is going to be harder than ever this year. But don't head to the dollar store. You can give something meaningful to those who matter to you by following this wallet-friendly, 10-step plan.

1. Set a Budget
First, be realistic about how much the holidays will cost. It's not just gifts you'll be buying—there's the extra traveling, eating out, and attending or hosting parties. Set a budget, and stick to it.

"Even the office party isn't free if you have to buy new clothes," says Sally Herigstad, a CPA in Kent, Washington, and author of Help! I Can't Pay My Bills. (And good luck convincing the woman in your life she doesn't need a new outfit.) "Make a budget that includes all your holiday expenses before you decide how much you can spend on gifts."

2. Write a Naughty/Nice List
Make a list of "A" and "B" people to whom you want to give gifts. Be careful you're not including people because they gave gifts to you last year—don't get guilt-tripped into giving a reciprocal gift.

"It's usually better to spend your time and energy on a smaller group of people than to try to please everyone," Herigstad says. If you have funds left over after taking care of your A-listers, reconsider those in the second tier.

3. Pay with Cash
Start setting aside funds for Christmas gifts early so you can pay with green instead of plastic. "Over a 2-year period, because of interest rates and any other penalties and fees, you can end up paying 30 percent more for something you charged than if you had paid cash for it," says Greg Womack, CFP, president of Womack Investment Advisers in Edmond, Oklahoma. If you do use credit, pay off the bill as soon as possible.

4. Start Now
Don't wait until the last minute. "Shopping early gives you more time to find the best price," Womack says. "This should be a tough holiday year for retailers, so look for some bargains—the best discounts might be available earlier when stores have a surplus of items in stock."

5. Be Selfless
You've been shopping for others all day. You're looking for a gift for your mom and, wow, flat-screen TVs are on sale. But before you try to figure out how big of a TV your wall can handle, remember: If you want to stay on budget, you must resist the urge to buy for yourself. Instead, add the item to your wish list.

6. Think Outside the Box
When searching for "the perfect gift," go for something personal, not high-priced. The best gifts don't cost a lot of money. Offer your services to those who you know could use them: Whether you're good with cars, carpentry, or photography, your skills will be appreciated. Or tell your friend you'll provide the beer for the Super Bowl party you know he's planning.

7. Take Stock in Your Presents
"There is a big sale now in the stock market with stocks trading at historic lows," Womack says. "Depreciated stock that has the potential to rebound down the road can be a great gift that has long-term value, but can cost much less than it has in recent history."

He recommends looking for major brands or consumer staple goods, such as Kraft, Walmart, and Johnson & Johnson. "Look at goods that people have to have," Womack says. "Hopefully these companies will be around for years to come, and now these stocks are on sale."

8. Join the Local Movement
Don't limit yourself to shopping centers. Your local farmer's market likely has homemade treats—salsa, honey, maybe even wine—that out-of-state giftees could never find. Or go the music route: "If you hear a good local musician, consider buying their CD," Herigstad suggests. "The work of local artists is more interesting and usually costs less than something from the mall."

9. Forget the Gift Card
Dollar signs are pretty hard to disguise when it comes to gift cards, meaning the pressure's on to not look cheap. But don't bother—they're usually a waste of money. "The receiver will probably either have to spend additional money to get what he wants, or he'll throw away part of it. What are the chances of finding something that costs exactly $25 with tax?" Herigstad says.

Think about it: How many unused cards do you have? But in this situation, it's your wasted money.

10. If You Can't Afford It, Say It
If a person on your list requests something you just can't afford, tell them tough luck—in a nice way. "Given the pervasive coverage of the economic downturn, most people know that many are affected by it," says Richard Shadick, Ph.D., adjunct professor of psychology at Pace University. "Level with them, and if they are persistent, then it is time to re-evaluate the relationship." And whether they deserve a gift.