Holiday decorations have yet to grace the aisles of local department stores, but with school supplies purchased and summer trips coming to a close, that tends to be the next major hit to wallets across the country.
Many Americans turn to credit cards to finance the holiday they want, resulting in a hefty bill that is still hanging around come February or March of the following year. In fact, consumer counseling agencies see a 25% increase in the number of people seeking relief for holiday bills that spiraled out of control.
Whether you just barely paid off last year’s festivities, or you’d simply like the peace of mind that comes from planning ahead, there are ways to ensure this year’s holiday season is free from one major downer: debt.
Start Creating Your Recipient List
If your list consists of every person in your office, mailman, and every teacher at your child’s school-stop!
Start with the basics – immediate family members and your closest friends. Gifts beyond that should be considered second, once you are able to determine what is left of your gift-giving budget.
One upside to creating a list now is the ability to reflect back on the first part of the year and any gift ideas that may have come from it. Think about birthday gifts that didn’t make it onto the list, or summer toys your kids are still asking for. Jot those ideas down.
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Think about your other year-end expenses and make a budget
The biggest way to avoid falling into the holiday debt trap is to consider your expenses the rest of the year, how much you are able to set aside and what your total budget will be come November and December of this year. This will ensure that credit cards won’t be used to finance your holiday season – it will be paid for in cash, BEFORE the gifts are handed out.
Once you’ve determined the amount, think about how this will be divided among those you are buying gifts for. I tend to give gifts equal in price to my sister and parents, small gifts (also equal in price) to close friends, and a slightly larger piece of the gift-giving pie goes to my significant other. Setting these limits helps tremendously in dividing up my holiday budget.
Now, how will you set aside these funds so you know they will be there when you need them? I create a new savings account for holiday spending. Maybe you would fare better with an envelope system that removes the cash from your accounts so it’s out of sight, out of mind.
Whatever it is, make it happen, and plan on sticking to it for the next several months.
Hit sales now and buy throughout the rest of the year
End of summer sales don’t just consist of mismatched bathing suits and flip-flops. Plenty of stores discount items that can easily double as the perfect holiday gift. For instance, many will sell luggage at a discount as the summer travel season comes to a close. Also, according to Consumer Reports, bike manufacturers tend to bring out new models in the fall, so earlier models can see a discount of anywhere from 10-40%.
Planning ahead also gives you the opportunity to troll sites that sell gift cards at a discount off the face value. If you know what stores you’ll be shopping around the holidays, you can snatch up the best, discounted cards before the inventory is depleted.
In addition, knowing a few items that will be on your list means you can snatch up discounted items as you see them. Not all stores are on the same sale cycle, so pay attention to when specific items might be discounted. It also doesn’t hurt to ask if a specific item will be going on sale before the holiday season. Often times stores don’t mind sharing that information if they know it.
Keep your spending in perspective
If holiday spending is simply adding to your stress, stop and reconsider your overall financial picture. Any holiday budget should leave plenty of room for all of your obligations that are far more important than gifts.
Stick to your plan now and the holiday season will be far less frenzied than years past. Who knows, you might even get to enjoy it. What a concept.