Half of Americans Plan to Spend Less Than $500 on Holiday Gifts This Year. Here's Why You Should Follow Their Lead

Keeping your holiday spending to a minimum could benefit you in several ways.

Many people love the practice of giving out holiday gifts. After all, it's nice to spread joy and put a smile on a child or family member's face. Plus, there may be people in your life you're really grateful for, like your children's teachers or the folks who cut your grass every week. It's natural to want to give them a gift as a way of saying thank you. 

But the cost of holiday gifts can really add up -- especially if you're obligated to buy things for a lot of different people in your life. And if money has been tight, you may be inclined to cut back on holiday purchases this year -- gifts included. 

A recent survey by Principal found that almost half of consumers plan to spend less than $500 on holiday gifts this year. It pays to take a similar approach if you're grappling with money-related worries.

You don't need debt hanging over your head

A lot of people are facing higher living costs these days due to inflation. And that's been putting a strain on many workers' paychecks. 

If you don't have a lot of money to spend on the holidays, then limiting your gift purchases is a smart move. The smaller a budget you set, the less likely you'll be to rack up a tab on your credit cards and pay it off over time.

Credit card debt is bad news no matter when you accrue it. Credit cards are notorious for charging high amounts of interest. And also, too much credit card debt can actually cause credit score damage. 

Plus, there's something demoralizing about starting off a new year with a credit card balance hanging over your head. Many people like to make New Year's resolutions in January that have them boosting their savings account balances and working toward different financial goals. But it's hard to make progress on those types of goals when you have debt payments to deal with.

Consider gifts from the heart

If you don't have a lot of money to spend on holiday gifts this year, it definitely pays to put yourself on a budget. That could mean limiting yourself to $400, $300, or less. 

Another route to consider taking is making your own gifts this year. Doing so could lower your costs tremendously. 

If you're good at knitting, you can make scarves and hats for the people you love. If you're great in the kitchen, your family members might really enjoy getting a tin of homemade cookies or a jar of jam. And you can always give the gift of your time. If you have a sibling with young kids, offering up a night of babysitting as your gift could really make their day.

The fact that some consumers are cutting back on holiday gifts is a good thing. If you're inclined to follow their lead, don't feel guilty about it. Instead, give yourself a pat on the back for making a sound financial decision.