It is the most wonderful time of the year – and the most expensive! The holidays are upon us and so is the pressure of finding the perfect gifts for friends and family. While we shop with glee, reducing debt during the holidays often takes a back seat.
If it seems as though your credit cards fill up with charges as fast as your belly on Thanksgiving, there is good news. With just a little bit of planning and a proactive approach to shopping, you can avoid the debt hangover many face after the holidays.
The Ghost of Holiday Spending
Americans spend billions of dollars every year during the holiday season. As recently as 2017, it is estimated that the average American piles up $1,054 of debt during the festive season. This figure has grown year after year with no signs of slowing down.
Worse yet, it takes the average American nearly four years to pay off holiday debt if only paying the minimum monthly credit card payment. Talk about a gift that keeps on giving! The interest alone would cost $194. This would wipe out any savings accomplished on Black Friday.
Plan Ahead and Budget
We get it, budgets are not very festive. But, they are an important tool for any plan involving finances. There are a number of ways to build your budget:
Thinking of the perfect gift for everyone can be difficult. Start a list for each person before the shopping season (or at the beginning of the year!). As you begin thinking of presents for everyone, add the gift idea and the price to your list. When your list is complete, the total will tell you if you’re going to overspend – all without spending a penny first.
You know how much you are willing to spend in total and who you need to buy presents for. Create a list with each individual and set a predetermined limit for each person. Keep the list with you at all times. This way you will know if you come across that perfect gift for someone if it will meet your personal budget.
Go All In
Create a budget for the three months leading up to January 1 and budget everything. This includes bills such as your mortgage, fuel, meals, and all reoccurring monthly items. Then add a line item for gifts. This method provides a broad view of your finances and a way to see how overspending will affect your other financial goals.
If you are setting limits on holiday shopping, always keep your budget handy. Either print a copy to keep in your purse or vehicle, or download one of the many free budgeting apps. It may also be just as helpful to create a note in your phone with limits. This method works well for many people who don’t want another app to check into daily.
Shop the Sales
A sale is only good if you are not piling up debt and accruing interest. In fact, doing so would likely cost more than if purchasing items at retail! However, this does not mean you will probably need to avoid some of the sales that happen during the holidays.
Of course, Black Friday is the king of all sales. But, be careful. Often the best sales are for loss leaders – products designed to get you into the store and entice you to buy other items without the same discount. To avoid this, consider shopping on Cyber Monday instead. From the comfort of your home, you are able to shop without getting caught up in the Black Friday madness.
Avoid Impulse Purchases
Avoiding impulse purchases should always be a good habit. During the holidays, however, shoppers are much more likely to buy more gifts than anticipated. Or, purchase gifts more expensive than we intended to buy.
But, impulse buys don’t stop there. Shoppers are more inclined to spend on themselves this time of year in fear of passing up those too-good-to-be-true deal. Then we need to include the cost of the café lattes and coffees need to keep us going. And, don’t forget those holiday lunches! It all adds up to unnecessary spending and higher debt.
Reducing Debt During the Holidays
What a wonderful gift it would be to enter the New Year with less debt than you have today! If you are entering the holiday season already in debt, you can indeed reduce your balance even during this time of year.
One of the best ways is to increase the budgeted amount set aside for your credit cards. Make your credit card payments after your basic living needs have been met and before all other spending, including gifts. This approach makes reducing your debt during the holidays a top priority.
If you carry debt on multiple credit cards, take advantage of any rollover interest rate specials one of your cards might over. This will allow more of each payment to go toward remaining principal instead of interest. Lastly, always pay your highest interest rate credit cards first and pay the minimum on the others. The result will be a domino effect knocking one card’s debt out at a time!
In some circumstances, even the best budget and credit card payment plan isn’t enough. If you find yourself struggling to make ends meet because of your debt, consider contacting Christian Debt Counselors. Our trained debt consolidation experts are here to help to make this holiday season a debt free one!