After the last bow has been untied and the last gift unwrapped, the last thing anyone wants is to start the new year with credit card debt. Before the holiday is fully in swing, here are some ways to combat shopping mistakes so that you don’t make holiday debt an annual crisis.
Make sure you don’t make these five mistakes:
1. Wait too long to start shopping.
Everyone has that one relative or friend who starts asking you what you want for a gift in August. The truth is that they have the right idea. Don’t wait until December to do all your shopping. You can reduce the impact the shopping season will have on your wallet if you spread it out, so that you can catch up with your bills. If it’s too late to follow this advice for this year, it’s sound advice to apply it to next year.
2. Neglect to budget for the holidays.
Budgeting year-round is always a good idea. By putting a small amount of money away monthly towards your holiday spending, you’ll ensure a nest egg that will help alleviate the shopping burden.
3. Sign up for store credit cards.
You may be wondering why, especially when the nice salesperson told you that you’ll save 15% if you open a store credit card. But opening store credit cards isn’t worth it in the long run. Not only do they often have higher interest rates and APRs, but your credit score can be impacted when it raises your credit usage. In addition, the hard inquiry on your credit when you open a new card can make your score dip and will stay on your card for up to two years.
4. Charge more than you can pay.
If you’ve ever charged more to your credit card than you can pay in a given month, you’re definitely not alone. But this is exactly how people wind up in debt. During the holidays, make sure you’re keeping an eye on how much you’re using your credit card. The best plan is to use cash or a debit card, so you’re not spending money you don’t have.
5. Put off your debt.
While it can be tempting to indulge during the holidays and pay your debt back later, this type of thinking will only lead you to create more debt until it becomes overwhelming. By budgeting for the holidays, you can still make sure you’re paying on all your existing debt, so you don’t start off a new year with even more.
Some things you can do to make sure your holiday memories aren’t tarnished by overspending include:
- Make a list of the people you’re buying for and the gifts that you’ll be buying. This way, you won’t forget someone and end up adding a last-minute spending spree onto any existing debt, and you’ll have a budget to go by.
- Make sure to include any additional holiday spending into your budget, including holiday cards, parties, travel, and food and beverage. Whether it’s a fruit cake or a gift for someone special, it all adds up.
- Get crafty with your gifting. By DIYing it, you can save money and make a gift that is truly memorable and thoughtful.
Of course, if you find that your current state of debt has become unmanageable, it might be time to talk to a credit counselor about a debt management program. Your counselor can work with your lenders for a lower interest rate, consolidated payments at affordable rates, and a payment plan that’s doable.
There’s no time like the present to embrace financial health, and by following these tips you can ensure your holiday season is less stressful and more fun with friends and family.