There are many predictions that overall holiday spending will increase this year, with the average family spending around $850 – $1000 on gifts – and nearly 40% of people use credit cards for their holiday spending. Yet it’s important to manage that spending so you don’t find yourself in a bind trying to pay off those holiday gifts that you charged on your credit cards. Bob Wamhoff, president of Wamhoff Financial Planning & Accounting, shares the following tips:
#1 Create a Budget – and Stick to It –
- All households should have an overall budget to manage their income and expenses – and that budget should include holiday spending.
- Holiday spending budget should include not only gifts, but also food and drink that you’ll bring with you to holiday parties, expenses related to special events and sightseeing, etc.
- Be realistic about your budget and the types of gifts you can give based on that budget.
- Keep track of your credit card purchases so you can monitor your holiday budget and stick to it. Consider your credit cards just like cash in your pocket. Once it’s used up, you’re finished!
#2 Create a Plan to Pay Off Your Holiday Debt –
- If you’re among the nearly 40% of people who use credit cards to pay for holiday expenses, plan for how and when you’re going to pay off that debt.
- If possible, pay it off when the bills comes to avoid interest.
- Use calculators on the internet to plug in your credit card balance and interest rate to see how much your interest is going to cost you if you don’t pay it off. This will give you a good picture of what your holiday spending will actually cost you.
- Determine where you can spend less (eating out, daily Starbuck’s visit, etc) so that you can gather up extra cash to pay off your Christmas Debt.
#3 Use Layaway –
- Great way to pay off purchases over time with no interest. You pick up your purchases once you’ve paid them off.
- Be sure to stay consistent with your payment schedule.
- Read the fine print and look at the service fees to open the account, and any applicable cancellation fees.
#4 Be Realistic, Think Longterm –
- Your friends and family don’t want you going into debt or risking your own financial plan to buy them gifts!
- Consider your expenditures and what they might mean to your savings long term if you cut back by just 5% or 10%. Over the years, that could add up to a lot of money in your retirement fund.