Thanks, Inflation: Essentials Are a Lot Pricier This Holiday Season

The majority (or 88%) of holiday staples have gotten more expensive over the past year, according to a Bankrate analysis of 40 items common to the season within the Department of Labor’s consumer price index (CPI). It means a tall task lies ahead for the two in five Americans (or 40%) who say inflation is going to change the way they shop, according to Bankrate’s holiday shopping poll.

Even beyond the holiday essentials, the fastest price burst in four decades has been eating up Americans’ purchasing power for more than a year now, likely leaving people with less spending money heading into the holiday shopping season. Altogether, inflation is costing the average American an extra $433 per month, according to an estimate from Moody’s Analytics.

“Last holiday season, the worry was focused on supply chain disruptions. Would people be able to find and buy the gifts they wanted?” says Mark Hamrick, Bankrate senior economic analyst. “This year, inflation has robbed consumers of purchasing power. Can they afford to buy holiday gifts when essentials—like food and energy, home heating and transportation included, along with costs of shelter—have led the way with price increases? That has a way of transforming the focus on quality over quantity of holiday gifts.”

Inflation may be as present as the presents this holiday season, but it doesn’t have to ruin the fun. Limiting how much inflation spoils your plans comes down to knowing which items are most inflated and crafting a plan—for both your shopping and your budget. Here’s what could weigh on your holiday budget the most this year and how you can stretch your money.

“The difficulty is, these holiday events are really meaningful for people, and as important as it is to save money and to live within our means, it’s really important we have these connecting moments,” says Nate Astle, certified financial therapist and consultant for Beyond Finance. “You can have connecting moments without breaking the bank.”

Most expensive this year: Holiday entertaining and traveling

Bankrate separated those 40 holiday essentials into four categories: gifts, experiences, travel and entertaining. And while prices jumped on the majority of holiday staples, there are clear areas where Americans are bound to feel inflation the most—and that’ll certainly be at a holiday party.

Seven of the 10 most inflated items belonged to the holiday entertaining category, with six of them being food: eggs (43%), flour and prepared mixes (24.6%), turkey (16.9%), dairy (15.5%), bakery products (15.5%) and sugar and sweets (14.9%).

Even if consumers find a way to limit how much they’re spending on feeding their guests, they’ll be sure to drop money on heating and powering their homes, cleaning up after their guests and suiting up their space with decorations. Energy services have jumped in price by 15.6% over the past year. Meanwhile, housekeeping supplies are up 11.9%, and household equipment and furnishings have jumped 7.6%.

The findings reflect inflation’s behavior more broadly: Food and energy are where they’ve been most salient. Household energy prices from a year ago have risen twice as fast as all other consumer prices (17.1% versus 7.7%). At the same time, food inflation has jumped 12.4%.

Meats, an essential entree during a holiday dinner, are up about 3% overall from a year ago. Price drops on popular holiday menu items, such as steaks and roasts (both are down a respective 6.9% and 5.3% from a year ago), have offset jumps in ham (9.1%) and pork (4%).

Poultry eaters, however, might be feeling the pinch of inflation more than anybody this holiday season. Chicken and turkey prices are up a respective 14.5% and 16.9% from a year ago.

Fish and seafood are up 7.4% over the past 12 months, while fruits and vegetables have climbed 9.3%.

That’s not to say your best bet to mitigate inflation is to avoid hosting a party. Those traveling to a destination are sure to feel the squeeze, with three of the 10 most inflated items in the “holiday travel” category: airfares (up 42.9%), gasoline (up 17.5%) and transportation services (up 15.2%).

Even the price of staying overnight on your way to a destination could add up, with hotel and motel stays jumping 6.4% from a year ago.

Still expensive, but deals can be found: Gifts and experiences

As it turns out, gift-giving might be the least inflated aspect of the holiday season.

Gift prices aren’t rising as much as other holiday categories—but consumers are still bound to chalk up more cash than they were a year ago. Prices have only fallen on three popular gift items: smartphones (down 22.9% over the past year), televisions (down 16.5%) and computers and devices (down 3.1%). All of the other 12 items within the gifts category have gotten more expensive.

Tools, hardware, outdoor equipment or supplies are the most expensive gifts of the season, rising 10.1% from a year ago. New and used vehicles (the second most expensive gift) jumped 6.9% from a year ago—though a marked improvement from the 16.3% gain last year at this time, as supply chain pressures ease.

That’s not to say buying your loved one a car is a wise financial choice. The cost of financing one of those big-ticket purchases has soared to an 11-year high, with five-year new car and four-year used car loans jumping almost two full percentage points since the start of the year, according to a Bankrate analysis of data.

Anyone considering gifting someone an experience will cheer this news: Sporting event tickets are down 17.7% from last year and are even 8.7% below pre-pandemic levels from October 2019, according to the analysis. Those same deals, however, aren’t everywhere. The price of a meal out at a restaurant has soared 9% from a year ago, while tickets to movies, theaters and concerts are up 6.5%.

But the most inflated facet of gift-giving isn’t what’s inside the box—but rather, what’s on the outside of it. Gift wrap and shipping costs are up 13.1% and 13.9%, respectively, more than any actual gift or experience.

6 cost-saving strategies for high inflation during the holidays

Analysts say retailers, especially big-box chains, are bound to entice cash-strapped consumers with discounts and deals, a unique feature of this holiday season as stores sit on a surplus of inventory and worry inflation could bite into consumption.

But don’t let inflation—or rather, the lack thereof—be the sole reason why you buy something this holiday season. Here’s how to craft your holiday budget and stick with it, whether you’re shopping for someone, throwing a party or planning a trip.

1. Craft your holiday budget, and don’t go over it

Before starting your holiday shopping, it’s a wise idea to know how much you can afford to spend. Take a look at your finances and figure out what your “hard stop” holiday number is—that is, the number you realistically can’t afford to go over. If you have a holiday fund already established, even better.

If you haven’t already built up a holiday savings fund, consider eliminating some discretionary purchases to free up cash. Don’t forget to keep track of your credit card rewards points when coming up with guardrails for your spending.

But remember: That number shouldn’t be so high that you have to dip into your savings or sacrifice contributions to your retirement accounts. Economists in Bankrate’s Third-Quarter Economic Indicator poll put the odds of a recession at 65% between now and the middle of 2024, meaning you’ll want to make every effort possible to leave any emergency funds intact for yourself in the new year.

It also shouldn’t be so large of a number that you have to rely on credit card financing to purchase it, experts warn. Credit card rates in early November officially topped 19%, a record high that makes the prospect of paying down any debt you rack up a timely—and costly—endeavor.

More than one in four Americans are planning to go into debt to pay for their holiday purchases, especially younger generations, according to a Bankrate poll. That includes paying down a credit card bill over multiple cycles and utilizing some form of “buy now, pay later.”

2. Ask who you’re shopping for to send you a list

It might seem like a sure way to ruin the surprise, but experts say you shouldn’t be the one making a list for your loved ones this holiday season. Instead, it should be the other way around.

Doing so not only gives consumers the opportunity to comparison shop, price check and look for items that clearly fit into their budgets—but it also helps make sure the gift you’re buying won’t go to waste. When inflation is high and already weighing on Americans’ wallets, no one wants to buy someone an unwanted item that just sits around and collects dust.

“Normalize gift giving as something that’s meant to be a shared experience, rather than something where you’re trying to hide the amount or hoping or wondering whether someone is going to like it,” said Michael Liersch, head of advice and planning for Wells Fargo

If you don’t manage to snag anyone’s holiday wish list, be sure the item you’re buying can be returned without a fee. Some stores are starting to charge consumers for returns as online sales boom. Cash or gifts are also growing in popularity as gifts this year, with experts saying they’re a way to help show someone you care about them while sticking to your budget.

3. Compare individual inflation rates with the items you’re buying, but make sure they’re still useful

When consumers check out inflation rates on individual items, they can figure out where there are better deals. Alcoholic beverages at home, for example, are up 3.8% from a year ago—but they cost 7% more at a restaurant. Price drops on sporting events tickets, meanwhile, might mean they’re a less inflated gift than, say, admissions to plays or musicals.

“The gift receiver need not know that the buyer got a good deal,” Hamrick says. “The opportunities are found where retailers are marking down items because of a glut of inventories, or things they need to sell. At the top of this list is clothing, footwear and consumer electronics including televisions and smartphones.”

But wasting money can be even more detrimental to your budget than inflation. Consider the longevity of an item and whether it’s right for the individual.

It might be cheaper to go to a basketball game this year, sure, but if your significant other likes musicals more, that might not be the right way of putting your budget to use. Meanwhile, electronics may have fallen in price, but they’re still going to be a costlier purchase than say, a pair of jeans or a sweater—which are up 4.1% from a year ago.

“It’s this idea of, if I buy something new, I’m going to really focus on the quality of that item and ensure it’s something I’m going to use, rather than accumulating a lot of things,” Liersch says. “Less is more and quality trumps quantity.”

Similarly, an item on sale might not always be the best deal. Experts warn some retailers might be sneakily adjusting the quality of their products so they don’t have to lift prices. Another concept called “shrinkflation” could mean you’re paying the same amount for less.

4. Travel tips: Don’t forget about your unused points and miles to fund your holiday travel

Consumers are often sitting on a stockpile of credit card rewards—“free” money that can only be put to use if it is, in fact, used. After you’ve price-checked flights or found the best mode of transportation to where you’ll be celebrating the holidays, be sure to utilize any credit card rewards points to fund some of that travel.

The right travel credit card could just be your saving grace in a high-inflationary environment. Not only could they offer you savings on flights, but many options on the market cover checked bags or travel insurance that can also help you save on any additional costs, such as delays or cancellations.

5. Weighed down by holiday travel? Find unique ways to give gifts or host gatherings this season

Consumers might feel like they have to learn how to juggle their budgets this holiday season, with prices soaring on everything that comes with the season—from travel and gifts to parties.

But even if inflation is telling you otherwise, Americans may still be able to afford hosting a long-awaited holiday party—especially if they find unique ways to do it. That might include hosting a potluck so no one person has to take on the burden of purchasing inflated food or housekeeping items. It could also mean going down an even more unconventional route, such as explicitly asking your partygoers not to bring a gift.

Americans might also be able to split gifts with others or give groups of people a gift they can share, such as purchasing a gift card for a family to enjoy a meal out together.

The majority of Americans (or 93%) in a February Bankrate poll say they’ve noticed higher prices, while 74% say inflation has negatively impacted them. That means everyone is experiencing the same burden, and you’re not alone.

If you’re struggling, there’s no shame in having a conversation with the people in your life about celebrating the holidays in a way everyone can enjoy. In the long run, it might even be healthier for your finances and your relationships.

“Shame is all about making us feel alone and separate and different, and one of the most empowering things we can do if we’re struggling financially is to tell people,” Astle says. He adds that the conversation can look like saying, “This year, I’m not in a place to do maybe my normal gift giving, but I can do this. You can still have meaningful symbols of affection and love without it coming in a box.”

To avoid spending money, consider creating your own gift for them, which might be even more meaningful than something that’s purchased.

“If my kids create something for their grandparents or their great grandma, that is more important to them than a $50 item,” says Deacon Hayes, CEO and founder of Well Kept Wallet. “It’s not the expensive stuff that really people value; it’s the thought that counts.”

6. Don’t think about it as cutting back, but rather aligning your holiday spending with what’s important to you

Community and quality time are important during the holidays, and there’s nothing wrong with Americans making every effort to celebrate this year—especially knowing the coronavirus pandemic likely kept their friends and families apart for the past two holiday seasons.

All that means it’s important to align your spending with what’s most important to you. Maybe skip or cut back on decorations for your home if you’re going to be spending the holidays somewhere else anyway. Perhaps say no to a gift exchange with a separate friend group if you already know you’re going to be paying money for a plane ticket.

“Identify what do I value most and then what will give me the most benefit?” Astle says. “If you can identify what you value, you’re able to create the experience without going over your budget.”

Personal finance is not about cutting back and living without the things you want, but making sure your money is allowing you to get there. The long-taught prudent financial advice applies to the holidays just as much as anything else.

“If you try to prevent yourself from doing something so deliberately and it’s so intense, it can be exhausting, and sometimes, it can make your brain be less able to control itself,” Liersch says. “When you are treating something like a light switch—on and off—it rarely is sustainable. Treat something more like a dimmer switch, dialing it back a bit or a lot, but not eliminating it completely from your holiday spirit.”

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