U.S. consumers plan to spend less this holiday season. Here’s how BMO can help make budgeting for the holidays easier

As holiday shopping kicks off, the latest BMO Real Financial Progress Index reveals 72 percent of Americans plan to scale back on holiday gift purchases this year, amid growing concern around the cost of living (57%) and their overall financial situation (39%).  

The Index provides insight on Americans’ holiday spending plans including: 

• Navigating Holiday Budgets: 
  • On average, Americans plan on spending more than $1,989 this season, including travel ($1,172), holiday gifts ($632), entertaining ($351), and decorations ($227). 
  • More than one-in-five Americans (21%) plan to spend more than $2,000 during the holidays. 

• Cutting Back and Cutting Out: 
  • 72% plan on buying fewer gifts this holiday season, with nearly one-in-four Americans (24%) cutting down the number of people on their gift list. 
  • More than a third (35%) plan on buying less expensive gifts. 

• Handling Spending Habits: 
  • 37% plan to spend less on fewer gifts and 45% plan to cut back on spending for birthdays, anniversaries, and other occasions throughout the year to spend more on holiday gifts. 
  • More than half (51%) admit to spending more than they know they should. 

• Financial Worries Ring Through the Holidays: 
  • 53% say thinking about holiday spending causes financial anxiety. 
  • 29% are not confident they will be able to afford every item on their holiday shopping list. 

• Post-Holiday Payment Plans 
  • Nearly half (49%) of Americans plan on using credit cards to pay for their holiday gifts and 7% plan on using buy-now-pay-later tools. 
  • On average, Americans believe it will take them three months to pay off their holiday bills. However, 21% are not confident they will be able to pay off their holiday bills on time and 12% are not sure when or if they will be able to pay off these bills.

The BMO Real Financial Progress Index also found nearly three-in-four (73%) Americans feel confident in their financial situation and 61% feel they are making real financial progress, while one in four (25%) feel less financially secure than they did a year ago. Concerns about their overall financial situation (79%), fear of unknown expenses (81%), housing costs (66%) and keeping up with monthly bills (64%) are among the leading sources of financial anxiety. 

BMO Helps Americans Budget for the Holidays 

In addition to creating a holiday spending budget and sticking to it, BMO offers the following tips to help Americans make real financial progress and navigate inflation: 

• Regularly meet with your banker or financial advisor to make sure your savings and payment patterns are on track to reach both near- and long-term goals. 

• Use free digital banking tools and apps to help track spending patterns and save. 

• Track your incoming and outgoing money flow as well as expenses to create an accurate budget. 

• Establish and build credit with credit-building solutions such as a credit building loan or secure card – and monitor your credit report score and activity often. 

• Set up a savings goal and recurring savings transfers into an account – no matter the amount – which will provide a sense of progress and motivation to achieve your savings goal. 

• Make a budget or savings plan specifically for large purchases like a car, vacation, or new appliance. 

Americans Feeling Generous Despite Economic Concerns 

Although rising costs are leading Americans to cut back on holiday spending, the spirit of giving remains strong: 

• Among the 71% planning on giving back this holiday season, 40% plan to contribute money and/or donate stocks, securities and/or mutual funds to charitable causes, while 22% intend to volunteer their time. 31% have given back throughout the year. 

• 59% say their philanthropic giving will remain the same as previous years. 

• The majority of those planning on giving back this holiday season want to help people in need (60%) and support the cause(s) they care about (52%).

For those interested in giving back, BMO offers a range of options, including: 

• Direct Donations: Contribute cash or assets directly to charitable organizations. 

• Estate Planning: Make testamentary gifts through a will or trust. 

• Retirement Account Donations: Designate a charity as the beneficiary of an IRA or 401(k). 

• Establish a Donor-Advised Fund or Private Foundation: Gain immediate tax deductions while distributing contributions over time.