No matter how diligent or financially responsible you may be, it’s easy to overspend during the holidays. Even with people avoiding stores and unemployment being high, experts still expect an increase in purchases. So, if you’re wondering how to avoid overspending during the holidays, we have you covered.
Curb Your Impulses
It can be tempting to use credit when you’re bombarded by deals and sales. A credit card can be a useful tool when holiday shopping, so long as it’s used responsibly.
“One of the biggest mistakes people make when holiday shopping is impulsively making big financial decisions,” says Nathan Grant, a credit industry analyst with Credit Card Insider. He tells Parentology, “Using a credit card to cover large balances or applying for a brand new credit card aren’t decisions that should be made lightly, let alone in places like the checkout line.”
Many retailers offer exclusive discounts and their own credit card offerings that can seem like the right decision at first, but if you don’t read the fine print, you could make costly mistakes. For example, if you’ve made a large purchase with deferred interest, you must be vigilant with paying on time. Missing one minimum monthly payment, or carrying a balance after the interest-free period means “you could be charged the interest rate on the entire amount. This could be a huge cost that could come as an unwelcome surprise,” Grant warns.
According to a recent Credit Card Insider survey, more than 40% of retail store credit cardholders regret applying for the card in the first place, and 73% said they applied just to get an initial discount. Grant encourages cardholders to pay off their statement balances by the due date “so you aren’t negating any rewards or discounts by paying interest.”
Pay It Off
Grant encourages cardholders to focus on paying down past debt before accruing new debt, “especially if they have high-interest rates,” he says.
Some of the more tried-and-true methods he suggests include a balance transfer, using a personal or consolidation loan, or chipping away at debt slowly, over time, according to your budget and financial situation. Remember, credit is money you haven’t earned yet. Paying off older debts outs you in control of your own finances.
Stick to a Budget
Make a list and check it twice — or more. Grant suggests that you decide exactly how you want to shop, and who you are shopping for. If you’re hosting a party or get-together and gifts are expected, try a gift exchange, where each guest picks one person to buy for. Give everyone a price limit to avoid exorbitant presents and hurt feelings.
“Maxing out a credit card to give every second cousin a gift this holiday is not the right way to go about your holiday shopping,” says Grant. “Planning your family gathering and setting expectations early on can help avoid a situation where you are burying yourself in debt just so you can spread some holiday cheer.”
While there may be discounts and great sales just prior to the holiday rush, starting even earlier could reap greater benefits. Shopping for gifts throughout the year based on availability and budget ensures that you’re not scrambling at the last minute. A great example would be buying seasonally-relevant items at the end of their season. Starting early puts you in control; you’re chasing the perfect gift, not the perfect sale.
Ultimately, it’s important to remember why we give gifts at Christmas in the first place. Whether you present your loved one with gold, frankincense or an Amazon gift card, it’s truly the thought that counts.