Four (4) Tips to Avoid Debt While Holiday Shopping
- According to Magnify Money, the average 2020 holiday debt was $1,381, a six-year high.
- When buying gifts for your loved ones, make sure the gifts you are purchasing are within your budget.
- The purpose of staying within budget is if you go over, it will result in negative repercussions that will make it harder for you to make ends meet at the end of the month.
This time of year can tempt many people to go over budget and dip into credit card funds and financing options. According to Market Watch, the financial news outlet, around 44% of shoppers accumulated more than $1,000 worth of credit card debt during the 2017-2018 holiday shopping season. In 2020, the average holiday debt increased to $1,381, as reported by Magnify Money. The December 2020 survey conducted by Magnify Money found that 31% of consumers, almost 1 in 3, accumulated debt to pay for holiday expenses.
However, holidays should be filled with love and cheer around your family and friends, not new debt as you head into the new year. Below are four tips to help you financially stay on track and out of holiday debt.
Create a Holiday Budget
Research shows that people tend to underestimate certain areas of their budget and overspend on decorations, food, last-minute gifts, new holiday outfits, and regular holiday gifts. Set aside a specific amount of money to spend on holiday gifts, and make a plan for how much you want to spend on each loved one. Creating a budget for each category that you plan to spend money on saves yourself the costly expense of not having a budget in place for the holidays.
It's Okay to Say, 'No.'
When shopping, stay within the price range you can afford, and don't be afraid to say 'no' to purchasing gifts that do not align with your budget. Your loved one may want an expensive gift; however, your budget may only allow you to spend a certain amount of money. Communicate with your loved ones about your finances, and more than likely, they will understand. The key here is to be honest with yourself about your finances to stay on track as you continue your holiday spending.
Price Match Gifts
Price matching is a policy that allows retail stores to offer a buyer the same price on an item as their competitor's store. Some of the biggest stores like Walmart, Target, Best Buy, and Toys "R" Us offer price matching. Comparing prices can save you money, and saving even a few extra dollars can go a long way. If you aren't sure whether a store offers a price match, it's worth researching its website or asking a customer service representative.
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Maximize Your Credit Card Rewards
Reward credit cards come with many benefits depending on your credit card company. One popular benefit includes receiving cashback on every purchase you make. Depending on your company's reward system, the holidays can be a great time to redeem your rewards points. However, if you spend more on your credit card than you can pay back every month, the interest fees will cancel out the rewards.
The Consequences of Overspending
If you have a budget and still find yourself overspending, there are consequences that could negatively affect your holiday season. First, as mentioned above, some credit cards offer cash back programs, incentivizing their customers to purchase more as they will have more money returned to them.
Although this is a good deal when appropriately used, its misuse will result in your credit card balance being too high to pay off at month’s end. Therefore, if you wish to avoid interest rates, on top of the principal amount you owe your credit card company, make sure you firmly stick to the budget you created.
The holidays are a special time of the year where you surround yourself with your friends and family members. So naturally, no one wants to worry about whether they have enough money left over after their holiday spending to pay the rest of their bills. As a result, creating a budget and sticking to it will help prevent you from worrying about making ends meet at the end of the month.
What tips do you have to avoid going into debt during the holiday season? Let us know in the comments below.