5 Holiday Shopping Tips From Economists That Will Save You Money

For holiday shopping help, you might first think of finding a personal shopper. Our suggestion? Tap the wisdom of a behavioral economist for the gifting season.

Behavioral economists occupy the branch of economics that deals with psychology as much as numbers. They focus on how consumers like you spend money—and the tricks and habits that can keep you from accidentally overspending.  

“We’re impulsive creatures,” says Katy Milkman, a professor at the Wharton School of the University of Pennsylvania. “When we face a situation that plays on our emotions…we tend to overweigh instant gratification.” 

Governments and public policy experts often lean on behavioral economists’ insights to get consumers to save more and make smart choices. But you too can learn a lot from what they offer. 

That’s especially true during the holiday season when family expectations, holiday deadlines and the thrill of bargain hunting can all converge to throw you off your budget.

Read on for five expert tips that can save you money—and stress.

1. Set some anchor prices

Staying on budget is never easy. But if you start with the right set of expectations you’re more likely to succeed—or at least come close. 

If you expect to spend $100 on a gift, there’s a good chance you might end up spending $110. But you probably won’t end up spending $200—at least not without making a mental note to revise your overall budget.

Those pre-baked spending expectations are what behavioral economists call this anchoring effect—a cognitive habit originally described by Amos Tversky and Daniel Kahneman, two pioneers of the field, back in the 1970s. 

Retailers are well aware of our anchoring habits. (It’s why they try to make goods look cheaper by pricing them at $99 rather than $100.) But you can use an awareness of anchors to your advantage too, says Mariel Beasley, co-founder of the Common Cents Lab at Duke University.   

When you set your holiday budget, she recommends picking an individual budget for each gift on your list. While this might feel like micromanaging, the goal isn’t to spend precisely that much each time. Rather it’s to make sure that if (or when) you miss the mark, you don’t wildly overshoot.

“Having that number in mind reduces your temptation to get something else you see that you think the person might like but ends up costing you more,” Beasley says. 

2. Save in dollars not percents

Discounts are great. But not all discounts are created equal.

One common mistake shoppers make, according to Milkman, is to focus on how steeply products are discounted rather than the actual dollars they will save. It’s great to score a 50% discount on a $100 hat, but even better to score a 1% discount on a $20,000 car. (Don’t sweat the math: The first is worth $50, the second $200.)

It can be easy to forget this in the moment. And studies show shoppers sometimes work harder to score bigger amounts off smaller value items. That’s because we like to take short cuts. Rather than strain our brains, we tend to rely on what economists call “mental accounting,” making value judgments based on outside, subjective criteria, like how sales are displayed. 

The fix is simple: When you are evaluating a sale, always take a moment to translate percentage discounts into dollar terms before you decide whether it’s really worth it for you. 

And, while skimming sale listings around the holidays can be fun, keep it in perspective. Devoting the same energy to getting even a slightly better deal on your car or home mortgage could have a much bigger impact on your wallet in the long run.

3. Create a tiny hurdle

Sales don’t last forever. Retailers are adept at using that fact to their advantage. 

“Holiday shopping is designed to try to make you feel like you need to make the purchase now because it might not be here tomorrow,” Beasley says. “That rush actually gets you to spend more money.” 

Your goal should be to make calm, considered decisions. If you’re at a store considering an over-budget gift, Beasley suggests forcing yourself to come back the next day before you actually buy.

More of an online shopper? Scott Rick, a marketing professor at the University of Michigan who does research in behavior, recommends creating what he calls “friction” to slow down the process. One step he recommends: deleting your credit card information from the account so you can’t do one-click purchases. 

“If you don’t have your credit card info saved within your account,” he says, “the prospect of getting up and finding your wallet can prompt you to second guess whether you need to make this purchase right now.” 

4. Revise after you splurge

Life’s full of exceptions. And so are our shopping lists. You see a gorgeous purse your mother would love but it’s three times what you planned to spend. Well, she’s your mom, after all

All the same, economists warn you need to be wary of unplanned spending. And when you do decide to splurge, you need to take the extra step of fitting these expenses into your overall budget.

Research shows when it comes to “exceptional purchases”—think buying a new computer or throwing a birthday party—we are far more likely to overspend than on our “ordinary expenses” such as cable and grocery bills. And making exceptions can be a budgeting double whammy: We tend to both underestimate our spending on exceptional purchases overall and also on the cost of individual exceptional purchases, studies show. 

“It feels like it’s just one time, but it accumulates,” Milkman says. 

While veering off plan is human nature, you should still strive to maintain discipline in your overall budget, say economists. When you do splurge, force yourself to go back to your monthly spending plan and subtract the amount you overspent from something else.

Rick suggests purchases in a spreadsheet. If, like many of us, you have an allergy to Excel or Google Sheets, there are plenty of easy-to-use online budgeting apps (including Buy Side from WSJ’s favorites) that can simplify the process.   

5. Think outside the gift box 

When it comes to holiday gifts, what first comes to mind is usually a box, wrapped in bright paper with a festive bow. But academic research indicates gifts which come in the form of experiences—like trips, picnics, or special outings—often make people happier than material items. 

One big reason: Experiences come with anticipation beforehand, enjoyment in the moment and fond memories afterward. Behavioral science research suggests that these actually improve happiness more than physical goods.

Apart from all this, however, giving a thoughtful experience can also ease some pressure on your budget. “Experience gifts can be cheaper,” according to Beasley. “You get the credit for a larger gift because it’s also your time and energy and attention,” she says. (Bonus: If your recipient is a social media devotee, you may even get points for creating an Insta-moment they can share.)

If you’ve been planning to give someone a new pair of ice skates, says Beasley, consider an evening of ice skating instead. Outings like this “generally are appreciated more…and stay in the memory longer.

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