How to manage holiday season when costs are high

Holiday expenses are rising faster than usual this year, but you can still keep them within your budget. The most effective moves are to host a smaller, potluck-style gathering, book travel as early as possible, celebrate closer to home, and start a dedicated holiday savings fund ahead of time that grows faster than inflation. You do not have to cancel the holidays. You just need to design a season that fits the reality of your household budget.

Why are holiday expenses higher this year?

Holiday expenses are higher this year because inflation is accelerating, not easing. The Consumer Price Index increased 0.4% on a seasonally adjusted basis in October, and that increase arrives at the holiday season time of year when households tend to spend the most.

The risk is simple. If you spend the way you did in past holiday seasons without adjusting for higher prices, you can overshoot your budget and start the new year carrying debt.

"Holiday costs have been rising for years, but what's different now is that the increases are larger than normal and much harder to ignore," says Patrick Huey, a financial planner in Naples, Fla. "It's not just media hype. The jumps are big enough that families are feeling them in real time."

How much will Thanksgiving dinner cost this year?

The Thanksgiving meal is expected to cost an all-time high of $90, according to consulting firm PwC. Several ingredients are driving that number, including the turkey, which costs roughly 8% more than it did last year.

How much more does holiday travel cost this year?

Holiday travel costs are up sharply as well, whether you fly or drive. Airline fares are up 22.4% from a year ago, according to national inflation data . Gas is up 34.2% over the same timeframe.None of this means you should scrap holiday get-togethers. They are part of our social fabric and important for your emotional well-being. The goal is to plan a holiday season that fits your household budget, and financial experts point to four ways to do that.

Should you scale back your holiday guest list?

Yes, a smaller gathering is one of the simplest ways to cut holiday expenses. Instead of hosting a big blowout with 15 or 20 people, consider a closer-knit group of half that size. You preserve the gathering at a fraction of the cost.

Share the costs, too. Hosting has become expensive enough that it is unfair to expect the host to shoulder every bill, so ask each guest to bring a dish of their own. A potluck spreads both the expense and the workload across the whole table.

"Maybe the gathering becomes more potluck-style, or the guest list gets a little smaller," says Huey. "Inflation forces tradeoffs."

How early should you book holiday travel?

Book holiday flights as early as you possibly can. Last-minute airfare during one of the busiest travel periods of the year, at a time when jet fuel costs have risen steeply, is where holiday expenses can truly skyrocket. Thanksgiving flight prices are up 31% year-over-year, according to fare aggregator Hopper.

To find an affordable ticket, be willing to revise your expectations. Hopper's recommendations for lowering the cost of a holiday flight:

1. Book as early as possible.
2. Look for fares on off-peak days during the week.
3. Be open to connecting flights rather than flying direct.
4. Consider unpopular departure times, such as early morning or late at night.

This could also be the right time to use accumulated air miles from your card rewards programs to shrink the amount you pay out of pocket.

Should you celebrate the holidays closer to home?

Staying right where you are is the single most effective way to spend less over the holiday season. If you must travel, pick one year-end holiday to travel for rather than making multiple trips.

"Two simple words: travel less," advises Nathan Mueller, a financial planner in Pagosa Springs, Colo. "Not traveling to relatives for the holidays while fuel prices are high is a super effective way to keep money in your pocket.

"Even if you don't plan on flying, a six-hour drive to the other part of the state has doubled in price. Factor in two tanks of gas or an airline ticket, and the savings can easily pay for gifts and meals."

How can you save for next year's holiday expenses?

Start a dedicated holiday fund now and keep that money somewhere it can outpace inflation. This year's holidays are almost upon you, so there is only so much you can set aside at this point. The smart long-term play is to make sure your savings grow faster than these high inflation numbers so next year's season is already paid for.

For example, with Current’s Savings Pods you can earn up to a 4.00% annual bonus, which surpasses even the 3.7% CPI. Building up cash reserves now creates a robust holiday fund for next year, so holiday expenses will not have to go on plastic at 20% average interest rates.

If you need a little extra cash to cover holiday expenses, or at any other time, you can see if you qualify for Current's Paycheck Advance feature.

Plan this way and you will not just survive one expensive holiday season. In a hot inflationary era, you will stay one step ahead.