The holiday season is upon us and this is the time of year where many people become careless with their finances. There is a cultural expectation that during the months of November and December that we spend more money than we possibly have all year in these short 61 days. We’re faced with buying food to feed groups of people that cost just as much as some people car notes or rent. Even buying elaborate gifts for people we rarely spend time with let alone have an engaging conversation with throughout the year with because our nation has set this spending precedence. These two months can be a time where our stress levels skyrocket and our bank accounts empty out (I wonder if there is a correlation between stress and high levels of spending money in a short period of time, hhhmmmmm). The malls and large warehouse stores become sardine cans when Black Friday arrives because people are throwing money at alleged highly discounted items. Now, we have Cyber Monday where sales are supposedly breaking the internet. Unfortunately, it’s an emotional time of the year where logical spending habits go out the door in hopes of finding huge sales to buy for large groups of people. This ideology is not healthy nor is it fiscally responsible.
However, this is the season to be jolly and thankful for so many blessings. Since a majority of our nation has identified this as a time of year to recognize our loved ones with food and gifts, we should celebrate and acknowledge those people in our lives. It’s not a bad thing, actually it is a great thing because this is a time of year, that as a people, we agree that we should be selfless and share our love and show our appreciation for those we love (personally, I believe we should show appreciation all year long).
To try to minimize the stress levels and keep more money in your bank accounts I have 5 Tips to help minimize your debt during the holiday season.
- Buy your gifts all year round. Instead of trying to cram all of your gift buying into a short period of time, buy gifts throughout the year. This way you can budget how much you spend, reduce levels of anxiety and minimize the emotional spending due to last minute shopping. In fact, if you are one that uses credit cards to make purchases, early buying will allow you to have paid off the credit card debt before Christmas arrives, therefore you won’t have to go into the New Year with huge amounts of holiday debt. Remember, stores have great sales throughout the year and you have the opportunity to get great deals on clearance items that can save you upwards of 60% off retail pricing. Use these intra-year sales to your advantage.
- Treat credit cards like money. DON’T spend more on credit cards than you can afford as if you only had cash. Credit cards have interest rates that compiles on a daily bases. So that item you bought originally at a deep discounted price during these flash holiday sales can end up costing you more if you don’t pay it off in the credit card grace period. In fact that $9.99 item you put on the credit card could end up costing you $24.40; that is 144% more than the sale price of the item. Put simply like this, if the item retailed for $12.99 but you bought it on sale for $9.99 and paid for it with your credit card that has a 12% interest rate that took you 12 months to pay off, you would have paid $24.40 for the item on sale rather than $12.99 if you would have just paid full retail value with cash.
- Be realistic in your giving. Everyone does not have disposable income to buy gifts for everyone they would like to, so this is where you can become innovative in your gift giving. Instead of spending money on gifts you can’t afford, buy supplies to make crafts, cards or even jewelry. Buying bulk supplies can save you a lot of money because it’s possible to make 8-10 gifts from a simple $50 raw material purchase. That can turn into huge savings versus trying to buy store bought items that can easily cost you $50 for one gift. In reality, many people will appreciate more the thoughtfulness you put into the custom made gift.
- Take advantage of cash back or point reward programs. Many stores and credit cards offer loyalty points or cash bonuses on your previous purchases. Accumulate those points throughout the year and use them to purchase holiday gifts. This can be a huge savings especially if you are buying large items during the year. For instance, the Best Buy reward program allows you to bank points for buying any item in the store. Buying a washer and dryer set can easily give you reward points of $60-100, add that to other purchases throughout the year and by November you could have earned more than $200 in loyalty points. That can translate to several gifts on your shopping list without having to spend any extra money.
- Give yourself a spending limit. Before you step out the door to any store to buy gifts, create yourself a spending limit based on your financial ability and stick to it. It will take discipline, however, if you know ahead of time that your limit for ALL gifts are $500, make sure that all the gifts you buy amounts to $500 or less. Being armed with a spending limit will give you truth in your spending and reduce the possibility of having a spending melee.
Financial responsibility during the holiday season is very important to your stress levels, happiness and ability to enjoy your love ones during this time. The worst thing we can do to ourselves is enter into a new year with debt and stress that will be difficult to manage over the next year. So give yourself the first gift, a gift of holiday spending responsibility.