How Inflation Impacts Holiday Shopping and Ways to Save Money

How Inflation Will Impact the 2022 Holidays

To understand how inflation may influence the 2022 winter shopping season, we may be able to draw some conclusions based on consumer shopping behavior last year. In November 2021, consumer prices spiked 6.8% higher than in November 2020, representing the largest increase in nearly 40 years, according to data from the Bureau of Labor Statistics.

But, despite inflation, the pandemic, labor shortages and supply chain challenges, holiday retail sales rose by 8.5% in 2021—a 17-year high—according to Mastercard SpendingPulse. Mastercard predicts holiday sales will increase another 7.1% this year over 2021. Ecommerce sales also increased 11% from the 2020 winter shopping season and 64.1% from 2019, a trend that is expected to continue in 2022.

Another trend that may persist is shoppers spreading out their holiday spending over time. In 2020 and 2021, retailers offered promotions early in the season and again later as shoppers rushed to take advantage of shipping offers that guaranteed delivery by Christmas. We're already seeing evidence this year's shopping season will start early, starting with Walmart releasing its 2022 Top Toy List at the end of August.

Additionally, this year's shopping season will likely see the same extension of Black Friday and Cyber Monday deals we saw a year ago. In 2021, many businesses began offering Black Friday deals in mid-October, and Cyber Monday sales ran for a week instead of their usual one-day promotion the Monday after Thanksgiving.

7 Ways to Fight Inflation When Holiday Shopping

Follow these tips to save money while gift-giving this holiday season:

1. Create a Budget

Gift shopping without a budget could lead to overspending on credit cards and taking holiday debt into the new year. Make a list of family and friends you want to include on your shopping list, and don't be afraid to be selective. It's perfectly appropriate to send a thoughtful card to distant relatives and work acquaintances rather than an expensive gift.

Also, decide how much you want to spend on gifts and stick to it. Determine how much you want to spend on each person rather than what you want to buy for them. While it's gratifying to share gifts with the ones you care about, overspending can replace that joyous feeling with stress, especially if it results in debt that can take a long time to repay.

2. Plan Ahead

Strategize your holiday shopping by watching store advertisements and flyers for upcoming sales and promotions, and plan your shopping accordingly. Mark special shopping days on your calendar and see if any items on sale line up with your shopping list. Here are some important shopping dates to remember:

• Black Friday: Friday, November 25, 2022
• Cyber Monday: November 28, 2022
• National Free Shipping Day: December 14, 2022

3. Start Shopping Early

Holiday sales in October have increased from 20% to 32% of the three-month period from October through December over the past three years. If the trend continues, starting your shopping early this year may help you avoid some of the anticipated inventory issues while also spreading out your spending.

4. Consider Paying With Cash

One strategy that might help you stick to your budget is to pay with cash only. Withdraw the amount you've budgeted for holiday shopping and use the funds to shop for gifts. Once you run out of cash, your holiday shopping is over.

For online shopping, use a prepaid card you can purchase at many outlets, including grocery, convenience and drug stores. Prepaid cards limit your spending to the amount you've loaded onto the card. While prepaid cards are a valuable tool for tracking and limiting spending, they come with maintenance, ATM and reloading fees.

5. Use Coupon Codes and Discounts

Generally, coupon shopping in 2022 doesn't involve going to the store with a "War and Peace"-sized stack of paper coupons. Today, it's much easier since most coupons are now digital, and you can usually plug in discount codes on a website's checkout page.

6. Comparison Shop

Whether shopping online or offline, you can save money by comparison shopping. Apps like RedLaser and ShopSavvy can save you time zipping from store to store by showing you what retailers charge for their products. Just enter the product name or scan the barcode with your smartphone while shopping, and you'll receive a plethora of information about online and offline retailers, their locations and their product prices.

7. Earn Rewards While You Shop

Cash back credit cards provide an excellent way to get some of your money back from any gifts you purchase with your card. Of course, make sure your purchases fall within your gift budget and pay off your bill before the due date to ensure you don't lose money by paying interest.

Additionally, check your account to see if you have any cash rewards or points you can put towards your holiday gift purchases. Two of the most valuable redemption options are to get a statement credit or deposit the funds directly to your bank account, allowing you to use the rewards to pay off your card's balance.

Other Options to Make Your Money Go Further and Control Holiday Spending

With some planning, you can complete your holiday shopping list and celebrate the season without going over budget or maxing out your credit cards. Consider the following tips to help you stick to your budget:

• Plan a potluck. Potlucks are a great way to share a meal with those you care about while saving time and money. Rather than buying and preparing all the food yourself, ask your friends and family to bring their favorite dish or dessert.
• Cut back on travel. Traveling during peak seasons, like the holidays, is usually more expensive than at other times. Consider scheduling travel arrangements for after the new year when airline and hotel prices may be lower or cutting back on travel altogether to save money.
• Give experiences. Giving tickets to a local museum or concert can be less expensive than a traditional gift. Start with your local library, which may have free or reduced ticket prices to local museums, theaters and attractions.
• Give your time. Time is a valuable gift, especially for someone who has little of it to spare. Mowing a friend's lawn, washing their car or babysitting their children may be more appreciated than a material gift for some. Best of all, it's free.

The Bottom Line

You can't escape the effects of inflation, but you can fight back by following a budget and taking steps to save money during the holiday shopping season. Starting your shopping early, using discount codes and taking advantage of sales promotions can help you control your spending and make your money go further.

It's also wise to keep an eye on your credit during the holidays. Consider signing up for free credit monitoring to detect potential identity theft, receive alerts of suspicious activity and more on your Experian credit report.