The holidays are right around the corner! For many people, that means it’s time to start shopping for gifts and decorations. If you’re a holiday enthusiast, you may have already started getting yourself ready for the season. As exciting as the holidays are, they can also put you at risk of debt. It’s easy to fall into holiday debt, so it’s best to plan ahead to ensure you can keep on top of your finances this season. Here are some tips we recommend!
Set a spending budget
Buying holiday gifts for friends and family can either be an exciting or overwhelming experience, depending on your love for shopping. In any case, though, it’s easy to spend way more than you intended to, and sometimes more than you can really afford. With so many flashy displays and tempting deals in every single store, the purchases can quickly add up. One of the best ways to avoid holiday debt is by taking a simple preventative measure: set a firm budget. If you and your friends and family usually give each other gifts, establish a common budget between everyone. This ensures that nobody will feel like they are over or underspending. You can also do a Secret Santa setup to create a more affordable gift exchange that is still lots of fun. However you decide to determine your budget this holiday season, do your best to stick with it. This can be tricky, but it will be worth it when the bills start arriving in January.
Pay with cash or debit
When you’re out shopping this holiday season, try to make your purchases with cash or a debit card. Cash is the most ideal method, because it forces you to hand over physical money, which makes our purchases feel more “real” than tapping a card. When we are actually seeing our savings leave us, we tend to be more careful about giving them away. However, if you are one of many people who rarely carry cash, a debit card is another good option. Since this takes money out of your account right away, you won’t be able to spend something you don’t have. The danger with a credit card is spending often feels like free money because you can push off the time when you need to pay it off.
Avoid getting extra credit
Several businesses have their own credit cards customers can sign up for and use to earn points with their purchases. While these can be useful for frequent shoppers, for many people signing up for more credit can be dangerous. People tend to use more credit when they have more available, even if they cannot afford the purchases they are making. Do not sign up for any new credit cards during this season, no matter how tempting it may be. Most likely, you will end up spending more than you could ever save through any rewards that come with these credit cards. Stick with your existing credit amount so you don’t put yourself in holiday debt this season!
Keep an eye on payment due dates
Once you make your purchases, make sure you can keep track of when you owe any bills. Odds are you will still put some items on a credit card, so it’s important to pay off those purchases on time. As you likely know, late or missed payments often result in penalties that can damage your credit score. In more severe situations, late fees can put significant financial strain on you if you are struggling to make your payments. Make it a priority to make the minimum payments on all your bills. This will keep you on track and keep you away from penalties. Of course, you should contribute more than the minimum amount if you are able to, but only if you can afford it!
Holiday debt can be overwhelming, but it is largely avoidable with some discipline and planning. Do your best to stay true to your budget, avoid new credit, and make your payments on time. These are simple things that can go a long way in helping you stay on the right side of your finances this season. As we approach the end of the year, you can also start thinking about your future financial goals! If homeownership or a change to your mortgage is on the horizon, I encourage you to reach out to a mortgage professional to start on the right track.
If you have any questions about your mortgage, get in touch with me!