Celebrate the Holidays without Racking Up Debt

DEC 08, 2010

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Have you started your holiday shopping? If youre like most Americans, youll spend about $800 on holiday gifts, plus more on holiday travel, gift-wrap, food, and decorations. If you charge your purchases and then pay only the minimum, you could spend six years or more paying for Christmas. Check out our tips to help you keep your holiday spending in check.

The festive atmosphere of the holiday season and a desire to shower your loved ones with gifts can easily lead you to spend more. Here are some ideas on how to balance the desire to create the ideal holiday with the need to reduce your debt, improve your credit rating, and increase your savings.

Make a budget and stick to it

  • Know how much you can afford. Make a budget, and dont spend more than you can pay off in one month.
  • Include non-gift expenses such as travel, gift-wrap, decorations, etc.
  • Track your spending. After each shopping trip, subtract your receipts from your budgeted amount. Seeing what youve spent can help you stay on track.

Plan how to pay for your purchases

  • Use cash. Counting out real bills may make you think twice about spending. Get more cash by cutting back on eating out or having a garage sale.
  • Do a credit check. Be sure your credit history will be able to sustain all that shopping. One quarter of credit reports contain errors that may cause your card to be refused or to carry a higher rate.
  • If youre making payments on a credit card, try negotiating a lower interest rate.
  • Watch out for store credit come-ons. You might get a one-time discount for applying for a card, but its high interest rate may actually cost you more than you save.

Make a gift list

  • Limit the people you need to buy for, and set a spending limit for each. Many people wont care if you dont give a gift this year; theyre probably reducing their spending as well.
  • Consider a hand-made gift or a gift of experience. Bake, make a scrapbook, write a poem, offer to babysit or clean house, make a dinner date, do something as a family. Make memories rather than buy stuff. 

Shop smart

  • Shop early.
    If you wait until the last minute, its likely youll resort to using credit cards. Studies show we tend to spend more when using plastic.
  • Shop online.
    Youll save on gas and may get free shipping. Find bargains on sites like eBay, but be sure to comparison shop and dont be sucked in by bidding over your budget.
  • Shop around.
    Sites like  pricegrabber.com let you compare prices.

Plan ahead for next year
Starting in January, save monthly for holiday shopping. Use automatic deposit, and find a savings or money market account that offers a good rate.

Spend less now, stress less later
The best advice is If you dont have the cash, dont spend.  Spending beyond your budget now may be tempting, but can damage your future creditworthiness and keep you from getting credit when you really need it. Advance planning and thoughtful shopping will help your holidays be less stressful and your new year more joyful.