When it comes to Christmas, debt and the holiday season go hand-in-hand. The average person spends over $600 on gifts alone. And unfortunately, many people don’t have that money in their bank accounts, so they rely on credit cards or loans.
Going into debt for the holidays can be an expensive mistake. Many people take months to pay off their debt; some are still making payments on their credit cards a year later. Thanks to interest charges, you could end up paying hundreds or even thousands more than you originally spent.
Forgoing gifts and decorations may be unrealistic. But that doesn’t mean you’re trapped in the holiday debt cycle. Instead, you can prevent ending up in credit card debt by planning now for the 2018 holiday season.
1. Create a Budget
To get started, look at your credit card statements for the holiday season for the past two or three years. Total everything you spent on the holidays, including:
- Charitable donations
The numbers may be gulp-inducing, but it’s important to take a hard look at your real spending. If you spent the same amount for several years, that’s likely what you’ll need next year, too, unless you’re willing to make serious cuts.
Once you have an idea of how much money you spend during the holidays, divide that total by 12. The resulting number is how much you need to save each month to have a debt-free Christmas. For example, if you spent $1,200 last year, you’ll need to set aside $100 each month to cover that same cost in 2018.
2. Open a New Savings Account
Open a new savings account that is exclusively for holiday savings. A new account has many different benefits over using a current one. A dedicated account, ideally named something like “Christmas 2018” can help keep you focused and motivated. And, if you shop around, you could receive a signup bonus for opening a new account. That money can give you a headstart on your savings goal.
3. Set Up Automatic Deposits
It’s important to make saving as easy as possible. Otherwise, you’ll always find other ways to spend your holiday fund. Setting up monthly automatic deposits to your new savings account ensures you save the necessary amount without even thinking about it.
4. Make Spending Cuts
If you find that saving the monthly amount strains your budget too far, it’s important to review your holiday expenses and see what you can cut. For example, perhaps you reduce how much you spend on gifts by $10 per person. Or, you can host a potluck dinner rather than providing everything yourself.
If you feel like you can’t sacrifice anything from your holiday spending, take a hard look at your everyday budget and look for any areas you can cut. Perhaps you can brown bag lunch instead of purchasing lunch each day, eliminate cable, or carpooling.
5. Make Extra Money
If you’ve already cut your budget to the bone, there might be nothing else to eliminate to save money. In that case, the only way to pay your bills and save for the holidays is to make more money. That might sound impossible, but it can be done with these strategies:
1. Sell Stuff: Round up unused items around the house like furniture, clothes or toys. You can sell those items on eBay or Craigslist for extra money to put in your savings account.
Launch a Side Hustle: Side gigs like driving for Uber, pet-sitting or delivering packages can help you earn more money in your spare time.
2. Work a Seasonal Job: Many companies hire extra help for the holidays starting in September. If your savings account isn’t where it needs to be, taking on a part-time job can help you make more money (and you may even score an employee discount).
3. Use Cash-Back Apps: Cash-back apps like SwagBucks and eBates give you money for your regular purchases. Use it throughout the year to do your routine shopping, and you could end up with an extra $100 or more in December.
Preventing Holiday Debt
It’s easy to lose control of your budget during the holidays. The pressure to have the perfect Christmas can exhaust your savings and lead you into credit card debt. To prevent paying the price for the rest of the year, take the time now to set up a plan for next year. Without having to worry about credit card debt, you can enjoy a much more peaceful holiday.
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