38% of Americans Plan to Cut Holiday Spending Due to Inflation. Should You?

It may not be a bad idea.

The holidays are always an expensive time of year. But this winter, your credit card balance might really climb during the holidays because of inflation.

Inflation is forcing consumers to spend more on everything from food to apparel to travel. In fact, the problem is so bad that 38% of Americans are now thinking about making holiday cutbacks, according to MassMutual's recent Consumer Spending & Saving Quarterly Index.

If you love the holidays, the idea of cutting back may be upsetting -- and understandably so. The question is: Should you scale back on the holidays this year, or find other ways to cope with inflation?

When you have no choice but to cut back

Say you're in a tough spot financially -- you're spending more money each month on living costs than you earn, you don't have a solid emergency fund, and your credit card balance has grown substantially since the start of the year. Then cutting back on the holidays may make sense if you can't afford to spend extra on nonessentials right now.

That said, your holidays don't have to be ruined just because you're short on funds and aren't willing to add to your credit card debt. For example, instead of hosting Thanksgiving for 15 people, you could have a potluck dinner where everyone brings a dish. And instead of spending hundreds on gifts during Christmas, you might give homemade gifts you can whip up at a fraction of the cost.

When you have more leeway

Let's say you're covering your monthly bills (albeit with little to no money left over each month), you have some savings, and you're paying your credit cards in full every month despite inflation. You may be worried that a huge holiday tab will drive you into debt. If that's the case, it could pay to cut back on some of the things you'd normally do. That could mean staying local instead of paying to travel, going light on decorations instead of spending hundreds to adorn your home with lights, and sending e-cards instead of printed holiday cards.

Now, if the holidays really are your favorite time of the year, you may be able to indulge in your usual hoopla if you're able to make other changes to your personal finances. You could, for example, get a side hustle for the last three months of the year and use your earnings to cover your holiday expenses if money is tight. Or you could spend more on the holidays but do 100% of your cooking at home in the months leading up to them so you're not paying extra for restaurants and takeout.

The fact of the matter is that the holidays only come around once a year. And if you want to enjoy them the way you're used to, you may have options that don't involve skimping on gifts, canceling parties, and missing the chance to spend the season with loved ones.