Don’t Be Left ‘With a Holiday Hangover and No Money Left to Your Name’: Dave Ramsey Says Do This Instead to Avoid the High ‘Cost of Christmas Debt’

It’s the same old story every year. You spend all of December decorating, swiping credit cards, and handing out gifts. And it feels manageable because it’s become part of an annual routine. You’re just deferring the cost of Christmas.

But then January rolls around, and the credit card statements start coming in hard and fast. It’s overwhelming, stressful, and even a little bit depressing. All that festive cheer has cost you big time, and now you’re going to spend half of the year scrambling to pay it all off.

Sound familiar? 

To break that cycle, you’ve got to start by accepting a hard truth: Christmas debt isn’t bad luck, and it’s not bad timing. It’s just bad planning.

That’s been the holiday message of personal finance guru Dave Ramsey for quite a while now — and this year, he’s been hammering the point home harder than ever. According to Ramsey, carrying holiday balances over into the new year isn’t a case of bad spending habits. It’s a case of bad budgeting habits.

Fortunately, he’s got a simple fix that could make Christmas 2026 a lot less painful on your bank balance. Let’s take a closer look.

Why Is Christmas Debt More Expensive Than It Looks?

Before we speed right on to actionable advice, we’ve got to have a talk.

Christmas debt never looks dangerous at first glance. You justify it because it’s seasonal, and it usually starts small. Sixty bucks here, a hundred bucks there, right?

Wrong.

The interest rates you’re going to have to pay on those purchases aren’t small. Commercial interest has shot up by nearly ten points over the last decade, and that trend isn’t going to reverse anytime soon.

That means your balances stick around for longer, and minimum payments will barely make a dent. Translation: The real cost of Christmas is always lurking in the background, and it keeps on climbing higher and higher.

But Ramsey is keen to point out that high interest rates aren’t even the only financial pickles you’ll be dealing with in January.

The start of a new year brings insurance premiums, post-holiday travel expenses, and higher heating bills along for the ride. There’s also the psychological pressure we put on ourselves to “reset” financially in January. Revolving credit card balances are a multi-month drag that prevents your fresh start from ever getting off the ground.

Ramsey’s advice to avoid this mess is simple: Stop treating Christmas like it’s some sort of surprise. It happens every year, the date never changes, and the expenses are always about the same. So, instead of acting impulsively and flashing the plastic, you need to plan ahead.

Ramsey’s Core Advice: Budget for Christmas Every Month

The best way to avoid a holiday financial hangover is to stop waiting until the end of November to try and figure out how you’re going to pay for everybody’s wishlist. That’s backward.

Instead, Ramsey advises that we budget for Christmas in the same way we budget for rent or insurance: Monthly and intentionally.

It’s actually genius if you think about it, because Christmas isn’t a shock emergency. It’s a scheduled expense. 

So, start by taking a look at what you spent on Christmas last year. Tally up all the essential expenses you made so you can get an idea of how much a reasonable Christmas costs in your world. Try to be critical and recognize frivolous expenses you could’ve avoided, but don’t be cruel to yourself either. 

After all, ‘tis the season, right?

Be sure you factor in all your holiday expenses (not just gifts). That’s the big mistake that a lot of us make, because the receipts aren’t limited to what you place under the tree. Think about work Christmas parties, a few catch-up dinners with friends, flights to visit home, the cost of boarding your dog, higher utility costs, and everything in between.

The easiest way to approach all these extras is to divide all your spending into different categories. The sum of those categories needs to be your spending target for next year. It might look big and scary at first, but it’s not when you break it down into 12 chunks. 

For example, let’s say you expect to spend $1,200 on Christmas next year. That’s a simple $100 per month savings plan.

By setting aside money every month towards your savings goal, you totally eradicate the pressure to borrow or dip into other savings pots when the holidays show up.

But Ramsey’s monthly savings plan is also brilliant because it forces you to come to terms with realistic expectations of the holidays. If you can’t spare $100 towards your Christmas spending, that’s a red flag. It means your holiday plans may be out of your financial comfort zone and need to be adjusted.

At the end of the day, credit cards can be a useful part of your wider spending strategy. They’re a great way to leverage rewards, get cash back, and build your credit score — but only if you’re staying on top of your balance every month.

When Christmas rears its ugly head, staying on top of that balance gets pretty difficult.

Just remember that credit isn’t a financial bandaid for the holidays. It’s just a year-long source of stress that steals from future you. By setting a savings target and budgeting monthly, you can totally avoid the holiday hangover and still have a great Christmas.