Avoid Starting the New Year with Debt
We set a lot of New Year resolutions. We want to lose weight, get more sleep, or finally learn to play that guitar that has been collecting dust. Despite our varied objectives, we all can agree that we do not want to start the New Year with new debt.
Many people, through their generosity, like to shower their friends and family with gifts. While very appreciated on the recipients’ part, it can bleed your wallet fairly quickly if you let it. However, with smart planning, self-control, and a little preparation, you can still adorn your loved ones with holiday gifts without drowning in credit card debt.
The biggest single endeavor to control your spending is to make a budget roster for everyone on your gift list. Note what you would like to spend for each person, but more importantly, declare a collective total budget. Now that you have established a comprehensive budget, start saving towards that as soon as possible. It would be wise to set up a separate account so it does not get tapped into prematurely for non-holiday related ventures. Ditch your morning coffee and take lunch from home to help you manage your savings.
If your family does large scale holiday reunions, then consider a gift exchange, or, Secret Santa. This is a fantastic way for everyone to participate in the festivities without having to buy for everyone. Typically, these functions have a modest price ceiling as well, such as $20 or $30.
When the Time is Right
The general consensus is to start buying as early as you can. Retail stores know that shoppers become desperate when time is running out, so you may end up paying top dollar. October may be too early for certain niches of the “hot” holiday market items, but not by much. The shopping gurus say that before Thanksgiving Day is the most prudent time to get the best deals. Checking online sounds excessively intuitive, but it is overlooked by many shoppers. There is almost an infinite selection of items online and you should always check for digital discounts and coupon codes. Moreover, buying online and shipping to the recipient can lift your burden of sending a gift.
Now is a good time to cash out on any loyalty points you have been saving up. If you are a member of a rewards card or membership benefits program, you may have forgotten about your stored points. If so, this could feel like holiday serendipity!
If you simply lost track of time and saving is not an option, you might choose to bite the bullet and run the gifts on your credit. If you are confident you can pay it back in full each month, a sensible course of action is to use a cash-back credit card. When you pay the bill in full, you avoid accruing interest, so that cash back is money in your pocket. You should not use a credit card if you think you will end up footing the bill for months to come, as interest rates can be extortionate and will put you into deeper debt. If you cannot acquire a cash-back credit card and resort to borrowing money, get qualified for 0% interest and achieve the mandated monthly payments to avoid interest.
Monumental resolutions are admirable in their own right, but small goals (such as balancing your holiday budget) should not be neglected. In the hustle and bustle, it is all too easy to forget that Christmas and the holidays should be about making memories, not piling on mountains of debt.
For more tips, information, or private advising, please visit www.paulmilleradvisor.com