Avoid Christmas Debt Hangover
Christmas is a time of giving, but you don't want to give yourself a financial headache in the New Year with bills and debts you can't afford. It's so easy to overspend with all the sale offers and pressures to buy, however you should plan how much you can afford and how you buy gifts before you start spending.
1. Plan to Start Early -Without a plan, most people are surprised year after year at how hard Christmas hits their finances. Ideally you were able to save up for Christmas gifts so you can limit credit card debt. Even if it is mid-November, you can still start saving. Last-minute shopping usually leads to overspending at Christmas. Start your shopping early, ideally before Thanksgiving, to give yourself time to find the best deals and make smart purchases.
2. Create a Budget -After every Christmas, so many of us look at huge credit card bills wondering, “where did all that money go?” Just like any other area of our lives, if we don’t plan a budget, spending will probably be out of control.
• Add a buffer: Whatever you come up with as a holiday budget, add at least 10%. So if you are at your limit, try to cut back to about 90% of that budget. Leave yourself a buffer to allow flexibility to adjust your plans if you can’t find a gift for the amount planned.
• Don’t forget the everyday bills: Remember the mortgage (or rent), loan payments, food bills, utilities and other bills still need to be paid. The consequences can be serious if they’re not. Even though it’s Christmas, your priorities should be in order.
• Plan the Christmas gift list: Determine who you need to buy a present for and have at least a rough idea of what to get each person. If money is tight, consider one gift for your sibling’s whole family instead of a gift for each person. Suggest exchanging names, or get creative and give handmade gifts.
• Checking it twice: Go through the list and think about who is on it. Did you forget anyone? Can you eliminate anyone?
• Be practical: Do you really need to buy a $40 bottle of wine when a $12 bottle will do just fine?
3. Consider a "Gift Truce" with Family & Friends -During these difficult times, more and more family and friends would welcome an opportunity to have one less gift to buy. If that is not an option, at least consider suggesting a spending limit.
4. Stick to your Budget -You created a budget to follow it-right? If you decided to spend $20 on Bobby, then you have to be vigilant to not buy that $50 blender that is just glistening at the department store. We all know there is nothing more fun than giving great presents, but you have to be honest with yourself as those January bills are going to hurt you more than anyone else.
5. Get Creative -Give an “experiences” gift, such as cooking lessons or a manicure. When you're strapped for cash you have to be creative to get the upper hand. Plus, a creative gift can often beat out the most expensive gift. To give the best gifts, think about the recipient and listen for clues on what they’re interested in.
• Start by planning carefully: Do you know all of the people you need to buy presents for? What about holiday parties? Do you need to bring a gift for a person or gift exchange?
• Be flexible: Don’t worry if you don’t spend as much as you planned on someone, or if you spend $20 extra on your younger child than your older one. Unless you got the younger child a whole lot more presents than the older too, they will never notice.
6. Look for Sales, including Shopping Online -Always be on the lookout for sales and remember that a lot of brick-and-mortar stores can't compete with the prices of online stores, even with the added shipping costs.
7. Do your own Credit Checks -If you are going to use a credit card, shop around and compare terms. Some cards charge high interest rates, but provide interest free periods or discounts. Budget for all these costs and monitor the payment due dates.
• Make sure you are watching your credit card usage. This has happened to almost everyone at some point. You use your credit card to buy your sister a new shirt, then you swipe again when you find the perfect gift for your mom, and so forth. Then, fast forward a few weeks into January when the nice fat credit card bill arrives. All of those small purchases have been tallied up and the result is a credit card bill that will take months to pay off.
• Whatever the deal, whatever the temptation, don’t borrow from high-cost lenders. The initial savings and convenience may prove to be a false economy.
• If you can afford to pay for your goods outright by cash, check or debit card, don’t be persuaded to take out extended credit agreements unless they really do work out cheaper.
• Planning, budgeting and organization are key to avoid getting into debt at Christmas and beyond. If your spending runs out of control, you can soon find that debt is not only a problem at Christmas, but can become a way of life.
8. Couples: Check-in with each Other - To manage spending at Christmas, plan on weekly huddles to make sure you're staying on track. Write down what you’ve spent, check people off your list as you buy their gifts and keep the lines of communication open.
9. Enjoy! - The Christmas season is about giving freely of yourself, spending the holidays with those you love, and relaxing. Hopefully these tips help you enjoy the holiday shopping season a little more this year, with a little less stress and frustration when it comes to holiday shopping. The holiday season brings with it beloved traditions, joyous memories and happy moments with friends and family-but it doesn’t have to bring financial stress.
10. Start Planning & Saving for Next Christmas - Once Christmas is over, it's worth looking at what you did well and what you didn't. Learn from your mistakes and start planning how you will do things differently next year. This might also be a good time to start saving for next Christmas!
Calculators & Additional Resources-At Palmetto Citizens, we can provide a wealth of information to help you manage your money more effectively. With free access to budgeting software, financial counseling and other resources, we are dedicated to ensuring you have all the necessary tools to achieve your financial goals. For more information visit us online at www.palmettocitizens.org/resources/money.html
MoneyWACH is a partnership between Palmetto Citizens Federal Credit Union and WACH FOX focused on financial education in the Midlands. Over the course of the year we'll cover financial and economic topics that matter to you. The segment airs the first Monday of every month on Good Day Columbia and will also be archived here for your convenience. Achieve your potential with Palmetto Citizens Federal Credit Union and WACH FOX.