What you need to know about staying out of debt going into the end of the year
With the holidays just around the corner, many parents find themselves filled with stress as expectations run high and the pressure to buy the latest gadgets and fashions for everyone weighs heavily on the mind.
And, while you may go into the holidays with good intentions, experts say it’s not uncommon for people to become victims of impulse buying and overspending.
As certain items dwindle on the store shelves, many people find themselves searching for last minute gifts to please friends and family. As a result, many of them find themselves whipping out credit cards and going into debt in hopes of creating the perfect holiday experience.
But is the debt really worth it?
Unfortunately, it isn't until after the New Year when the credit card bill comes and what was meant as a good gesture quickly turns into regret. According to a survey done by Consumer Reports, about 12 million Americans are still paying off credit card debt purchases made from last holiday season.
Often people don’t realize how much money they’re spending until January — 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.
Ending the holidays steeped in debt is hardly worth the satisfaction of getting everyone in your family the hottest new holiday gadget. 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.
So, how can you avoid suffering from a debt hangover this season?
Create a budget and stick with it. Before you start spending, do a little math and figure out how much you can afford. A general rule of thumb is to use the “1.5 rule.” Don't spend more than 1.5% of your total gross income on holiday-related expenses. If you're already in debt, consider spending less than one percent.
Many people on your list would enjoy a box of cookies or a homemade meal more than an expensive gift. Don’t stress about spending a ton of money on every person, think about those people on your list that might enjoy something homemade.
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 cards, entertainment, etc.
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.
Consider cash before credit
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.
Say no to store cards
Resist the temptation of getting store credit cards. The low introductory interest rates may seem enticing but that rate will expire–and sooner than you think.
Avoid last minute shopping
Plan your shopping trips in advance and shop as early as possible. Be organized when it comes to getting gifts to avoid paying extra for last minute gift purchases. If you’re looking to make the most of your money this season, planning how to shop is perhaps the best way to ensure your holidays won't be spoiled by a huge credit card bill come January.
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.