PhotoHoliday gifts, travel, and celebrations can lead to major debt long after the holidays have passed, but taking steps to get your finances in order before the holidays can help ensure you -- and your credit card -- don’t start the New Year off on the wrong foot.

Being financially prepared to handle the holidays is a vital part of keeping post-holiday debt at bay. To get prepared, it’s important to have a holiday spending plan in place before you start shopping. Budgeting and planning can help you stay disciplined, even when the pressure to spend is everywhere.

Holiday spending strategies

Debt accumulated during the holidays can stick around, and continue to snowball, well into the New Year. A recent survey found shoppers added an average of $1,003 to their debt during the holidays. While this amount might seem manageable, it can quickly become a burden.

About half of those surveyed planned to chip away at their debt over more than four months or just make the minimum payments -- which could extend the debt to 10 years or more and tack on nearly $400 in interest.

To avoid being buried under a mountain of holiday debt, it’s important to make sure you don’t get carried away this holiday shopping season. Here are a few smart shopping and saving strategies.

  • Figure out how much you can spend. Take into account your normal monthly expenses (like gas, utilities, groceries, and insurance), then factor in your flexible budget groups (like dining out and fun activities). See where you could stand to make a few small sacrifices (like cooking at home instead of eating out). This will give you more money to put toward gifts.

  • Make your list. Create a master list of all the people you will need to buy gifts for this year. Next to each name, write down the specific amount you will spend on a gift. If the total tab comes to more than your budget can handle, rethink your list. Consider drawing names instead of buying for multiple families, doing a white elephant gift exchange, or only buying gifts for the kids.

  • Save a little each week. Setting aside as little as $25 to $30 each week can help take the sting out of holiday shopping. At the end of just eight weeks, your small weekly savings will have grown to a few hundred dollars.

  • Choose thoughtful gifts. Ahead of the holidays, shoppers are immersed in a veritable flood of ads for expensive gifts. However, spending top dollar on gifts for loved ones isn’t always necessary. Take some time to think about what gift would mean a lot to someone. Personal gifts tend to go over big and be less expensive than pricey, conventional gifts.

  • Know that it’s okay to say "no." During the holidays, it can feel like there’s a new holiday gathering or gift exchange to participate in every week. But if it doesn’t fit into your budget, learn to say “no.” Don’t force yourself to use credit to buy a gift or new dress for an event.

  • Use cash, not credit. In addition to only making purchases you planned for in your budget, make sure you can pay for them now. Commit to using only cash or a debit card to help prevent yourself from overspending. If you choose to use a card for the cash back or points benefits, be sure to pay it off every time you make a purchase.


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