There’s a magical feeling in the air this time of year, but that magic costs money. Every year comes the pressure to spend more to create the perfect vacation.
This high-cost season can leave you with lingering debt. According to NerdWallet’s 2022 Holiday Shopping Report, 31% of 2021 US holiday shoppers who used a credit card to pay for gifts still haven’t paid off their balance.
With a little planning, you may be able to avoid holiday debt. But if you go over budget and have balances on your credit cards, there are ways to limit the damage to your finances.
1. Start with a plan
Start with your budget and gift list, as well as a grocery list if you’re hosting parties. Shopping apps and web browser extensions can make it easier to track price trends, compare prices at different merchants, find discount codes, and earn money.
Shopping online can facilitate overspending due to its convenience as well as improved user experience on merchant sites.
“All of these different companies are trying to create the fastest, easiest way to buy things,” says Emily Rassam, senior financial planner at Archer Investment Management in Charlotte, North Carolina. Rassam curbs the urge to spend by adding items to her cart as she spots them, but only reviewing what’s in the cart and making a final purchase decision once a day. month. A little extra time between finding items and sitting down to buy them can make you guess your choices and then pull a few items out of the cart.
2. Beware of sneaky costs
Don’t forget the little details that add up, like decorations and gift wrapping. Reuse what you can – anyone keeping old gift bags in a closet, now’s your time to shine. Rassam recommends looking for deep discounts on these items immediately after the holidays end.
Hosting parties and hungry guests also costs more now. The cost of food at home increased 12.4% from October 2021 to October 2022, according to the Bureau of Labor Statistics.
Beth Moncel, the founder of Budget Bytes, an online resource for learning how to cook on a budget, suggests sticking to a simple holiday menu that you can prepare inexpensively. “Classic recipes are simple, don’t require fancy ingredients, and are always totally delicious. Especially if you add an extra dab of butter,” Moncel said in an email. “A little extra butter is an easy and economical way to spruce up any recipe a bit!”
3. Create a debt repayment plan for the new year
If you have holiday debt, add it to your list of New Year’s resolutions. There are a few actions you can take to stay motivated:
— REDUCE INTEREST PAYMENTS: Consolidate your high-interest debt with a balance transfer credit card or personal loan. But note that while these products may help you spend less on interest (depending on the terms you qualify for), they don’t address why you got into debt in the first place. They may just be useful when trying to pay it back.
– REDUCTION COSTS AND ATTACK DEBTS: Start the new year by browsing through recent credit card and bank statements to see where you could cut spending. Any savings you make this way can be applied to credit card payments. If you received cash gifts or vacation bonuses from work, use those funds to pay off your debts.
– ASK FOR HELP: Financial professionals and nonprofit credit counseling agencies can help you see your complete financial picture so you can take action. Dealing with money issues on your own can be difficult, but unbiased advice can make it easier to get started.
Americans are addicted to buying stuff — but consumerism doesn’t make us happy, and it also contributes to climate change, explains NBCLX storyteller Chase Cain in the next part of his Climate Change Survival Guide. So in this holiday shopping season, which is already more difficult due to supply chain issues, try alternative gift ideas, like experiences or second-hand items.
4. Start planning for next year
Heath Carelock, program director of the Financial Empowerment Center at Prince George’s Community College in Largo, Maryland, cites his mother-in-law’s year-round dedication to vacation planning as a way to avoid debt. “She starts saving for the holidays from New Year’s Day. She is trying to buy all her Christmas presents by August.
Carelock suggests shoppers take advantage of holiday sales throughout the year. If you know a sell is coming, he says, wait until then for a buy.
Spreading out your vacation spending gives you more time to shop around, find deals, and avoid quickly racking up a pile of credit card fees. “It’s about having a slow burn as opposed to a conflagration,” says Carelock.
This column was provided to The Associated Press by personal finance website NerdWallet.