Envelope System Keeps Holiday Shoppers Debt-Free

NEWS // December 2, 2015

Envelope System Keeps Holiday Shoppers Debt-Free

Is overspending a holiday tradition? It doesn’t have to be. Start a new tradition this year: stick with your budget and avoid credit card debt.

Here’s how:

1. Create a holiday spending plan

Develop a spending plan (aka budget) that includes all your holiday expenses. Besides gifts, include the costs of wrapping paper, cards and postage, decorations and lights, entertaining, eating out, special clothes (Christmas sweaters anyone?), charitable gifts, and travel.

Save time by using the Holiday Spending Worksheet and Calculator at

2. Make a gift list

Write down each person’s name and how much you plan to spend on each. Add up the total dollar amount for all the gifts. Does it fit in your budget (see #1 above)? If not, adjust the amount per person or limit the number of people on your list.  

3. Pay cash for gifts

Take cash when you shop and leave your credit cards at home. Research finds that people spend more when paying by credit card, than by cash. Why? It’s easy to overspend when all you have to do is swipe your card. Handing over cash is more “painful” so cash shoppers generally pay more attention to prices and spend less.

Plan to do some or all of your shopping online where paying cash is not an option? Keep reading.

4. Use the “envelope system” to manage your cash

Get enough cash to pay for all the gifts on your list. Sit down at home with the cash, your gift list, and a stack of blank envelopes. Write each person’s name on the front of an envelope, and put the budgeted amount of cash inside.

When you go shopping, pay for gifts with cash from the appropriate envelope. If there’s not enough money for the gift you selected, find another gift that fits your budget. When an envelope is empty, you are done shopping for that person.

5. Pay with a credit card and use a “modified” envelope system

Are you planning to shop with your mobile device or online? Modify the envelope system so it works for you.

Label an envelope for your “checking account”. Each time you charge a gift, put cash to cover the payment in your checking account envelope. When you are finished shopping, the envelope will have the money needed to pay the credit card bill that arrives after the holidays.

No debt, no fees, and no interest...that sounds like a happy start to the New Year!

Looking for additional information? Read 5 Steps to Prevent a Post Holiday Financial Hangover.

Article provided by Patti Wooten Swanson, PHD - Nutrition, Family, and Consumer Science Advisor, University of California Cooperative Extension, San Diego