The holidays may be the most wonderful time of the year, but they're often the most expensive. And this season is shaping up to be no exception.

The average American expects to spend $1,193 on the holidays this year, reports credit resource company Crediful, broken down as follows:

  • $536 on gifts.
  • $350 on travel.
  • $194 on food and drink.
  • $113 on decorations.

If you intend to spend similarly this year, you'll need to make sure your savings and income can really support that plan. Otherwise, you'll risk landing in debt and hurting yourself financially right in time for the new year.

Man lifts girl on his shouldes to place star on Christmas tree while woman looks on


How will you pay for the holidays?

There's nothing wrong with using your incoming paychecks to cover your holiday expenses, nor should you hesitate to dip into your savings to tackle those costs -- that's what that money is there for. On the other hand, raiding your emergency fund to pay for your holiday expenses is a bad idea. If you go that route, you'll risk not having the funds available to cover a true emergency, like a home or automobile repair. Last year, 11% of U.S. adults tapped their emergency savings to swing their holiday spending, so you definitely don't want to follow in their footsteps.

Along these lines, you also don't want to rack up credit card debt to cover your upcoming holiday purchases. If you do, the things you buy will only cost you more, and you'll risk damaging your credit score in the process. Last year, 32% of Americans went into debt during the holidays, and roughly 17% of those who did are still paying that debt off.

If you rack up $1,193 in debt this year on a credit card with a 20% APR, you'll waste $133 on interest if it takes you a year to pay that debt off. Meanwhile, you'll throw away $264 in interest if paying it off takes two years. That's money that can be used for more important purposes, like padding your emergency fund or boosting your retirement account, to name just a couple.

The takeaway? Have a plan for how you'll pay for your holiday expenses, and make sure it doesn't involve adding more debt to your name. If your income and savings can't support the spending you want to do, you can try increasing your available cash by taking on a second job. Many retailers and local businesses need extra help around the holidays, so if you're willing to hustle, there's a good chance you'll find something.

And if that doesn't happen, you may have no choice but to simply set spending priorities and cut back as needed. That could mean hosting one less gathering, buying fewer gifts, and skipping the home decor this year. The holidays will still be the holidays regardless of how much money you spend in the course of celebrating them, and if you manage to get through the season without incurring debt, you'll have one more thing to be grateful for as the new year rolls around.