What you need to know about staying in the black going into the New Year
The holiday season is quickly approaching. While it is a wonderful time of the year, many people find themselves filled with stress, anxiety, pressure or guilt -- especially if their finances are tight.
With expectations high, it can be hard not to overspend during the holidays. Between family, friends and co-workers, many people find themselves whipping out credit cards and going into debt in hopes of creating the perfect holiday experience.
Often people don’t realize how much money they’re spending until later — when the credit card bills come. It’s at this time that they wish they had spent less money on gifts, less time in stores shopping, and less money on themselves while shopping for gifts.
According to a recent survey done by Consumer Reports, about 12 million Americans are still paying off credit card debt purchases made from last holiday season.
Ending the holidays steeped in debt is hardly worth the satisfaction of getting everyone you know their favorite gift. While it’s easy to get caught up in the holiday spirit when looking for gifts, don’t forget the importance of making good financial decisions to avoid any holiday regret.
Here are some do’s and don’ts to consider:
Do make a list
Before you head out the door to hit all those Black Friday sales, make a list of all the people you need or want to buy gifts for and a budget for each. Also, don’t forget to consider expenses for any holiday related decorations or necessities such as wrapping paper, cards, etc.
Don’t over use your credit card
Avoid unnecessary and impulsive purchases by leaving the credit cards at home when shopping. Instead, opt to use cash or a debit card to help you stay within your budget. If you do use a credit card, spend wisely and pay off any debt immediately.
Do save with sales
From online sales to coupons and discounts—consumers can help save during the holidays by simply doing some research. Before heading out to shop, make sure to check out the weekly sales ads. Use online websites such as Google Shopping and pricegrabber.com to find the lowest price on items.
Don’t be tempted by deals that are too good to be true
Resist the temptation of getting in-store credit cards. The low introductory interest rates may seem enticing but that rate will expire with above average interest rates–and sooner than you think.
More than anything, establish a budget and stick to it. Before you make any holiday related purchases, you should have a spending plan and know what you can afford.
A general rule of thumb is to use the “1.5 rule”. Don't spend more than 1.5 percent of your total gross income on holiday-related expenses. If you're already in debt, consider spending less than one percent.
By developing and sticking with a holiday spending plan, you can enjoy the holiday season and avoid suffering a financial hangover after the first of the year. You and your bank account will be happier for it in the long run.