Avoid debt this holiday season
As the holiday season approaches, I begin to think about wonderful music, good food, colorful lights, family and friends, and debt. Yes debt. The holiday season was one of the times in the past where I unfortunately had a tendency to significantly increase the balance on my credit cards.
I would never plan ahead for Christmas and buy my presents all at the last minute and using a credit card. Each year I would thoroughly convince myself that I would just pay it off quickly after the first the year. Each year I would never due that. I would pay the minimum payments and always find some excuse on how to spend the extra money. As a consequence, each month my debt would grow significantly due to the interest and continued use of the cards.
A few years back, I vowed to never let that situation happen again. Here’s how you can to:
Set a Holiday budget
One of the biggest problems is that people don’t set any spending limits. For some reason, people seem to think that the holidays are an excuse to spend whatever they want. They also seem to think that the bigger and more expensive the gift, the more meaningful it is. Simply not true. Some of the best gifts can cost little to nothing.
Set a budget. The way we do this is by listing off each friend or family member and we place an amount next to them. We don’t exceed that amount. If the total of these amounts is more than you have in your normal budget or Holiday savings (see below), then you either 1) Cut each person’s amount by some percent or 2) Remove people from the list and send them a nice card instead.
Feel bad about not getting someone a gift? Think about it this way, if you were the person on the receiving end, would you want to receive a gift that put giver in debt in order to get it for you? I sure wouldn’t…I’d feel terrible.
Begin saving for the Holidays early
This is the single biggest (and easiest) thing you can do to avoid debt during the holiday season: save early. Right after the holiday season is over, my wife and I decide in advance how much we’ll need for the next holiday season. We factor in any travel, presents, food, or whatever else, and then add in a “fudge factor” of say 10%. We then divide this amount by 11 (you want your savings available a month before December) and set-up automatic withdrawal’s into a dedicated savings account just for Christmas (we use ING Direct).
You must me disciplined though and don’t spend it! Saving in advance is the no-stress, no debt way to pay for the holidays. It avoids the bad moods, frustration and doom and gloom involved with using credit cards.
Get rid of your credit cards
Even with these tips, are you still concerned you’ll be tempted to use your cards? Easy solution: get rid of them. I cut mine up two years ago and haven’t needed them once. I have an emergency fund instead. Not comfortable with cutting your card up? Than make them difficult to access. Lynnae at Being Frugal froze hers. You could also give them to a relative you trust for safekeeping or place them in a safe deposit box. Anything that will make them difficult for you to access. Making you take time to find them will force you think about using them. I still highly recommend just getting rid of them altogether, but realize this is a big step for some.
Prioritize and Just say no
So you’ve gotten rid of your credit cards, but are just now reading this article. 2 months doesn’t give you enough time to save for everything. Prioritize everyone on your list and begin removing people with lower priority. I know this seems harsh, but it’s an absolute must. Instead, make them a handmade gift, or write them a nice personal note and card.
If you’ve bought them something in the past, and are concerned with how they’ll feel about only receiving a card this year, than just be honest. Explain to them about how you’ve bought the gifts in the past using money you really didn’t have. Tell them you’re trying to get your finances turned around and that you just can’t afford something this year, but that next year will be different. No reasonable person would get upset with a explanation like that. If they do, than I would strongly question their relationship and their motives.
The holidays used to be a very stressful time for me. With each swipe of the credit card I would wince, knowing I was just going further and further in debt. At the time, I saw no other option. Now I know better, there are lots of options.
Don’t postpone this decision until next year, make it now. Don’t make that New Year’s resolution you’ll never follow, make a commitment to yourself right now to go credit card free this year. Begin the process now of turning around your financial life. I promise, it will make next year’s holiday season far less stressful!