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4 Ways You Can Eliminate Holiday Debt From Your Future

piggy bankThink it is too early to think about holiday debt? It is not! September is here and before you know it, you just breezed over October and November. Once the 9th month comes in, you need to realize that you should be thinking about how you will spend your money during the holiday season.

If you want to prevent debt during the holidays, the most important thing that you can do is to start preparing for it early. A little bit of planning will never lead you astray. What you have to realize is that the big expense that you make during the Thanksgiving to Christmas season should never take you by surprise. But guess what? A lot of people oftentimes find themselves unprepared for this.

According to the data shown in an article from DailyFinance.com, 55% of Americans who were surveyed in September of 2013 were not saving for the holidays. It is not really a common practice to do so. Why? Because we all know that we can rely on your credit cards to pay for the expenses that you will make. While this is convenient, it is not always the safest way to make purchases.

The same article revealed some disturbing data that indicated how some parents are willing to take on holiday debt just to buy their children some gifts for the season. 57% of parents are willing to make this sacrifice. But as gallant as it can be, it is also a sacrifice that is unnecessary. Those who earn less than $35,000 are willing to be in debt for up to $700. In fact, 31% of American consumers do not have a spending limit on their holiday buying.

We need to stop the habit to starting our New Year with debt. If you really want to eliminate holiday debt from your future, you have to realize that early planning is the key. If you have yet to act on your holiday expenses, then do not waste any more time. You need to start getting your act together.

4 step plan to avoid incurring debt during the holidays

Fortunately for you, there are ways to control holiday spending. Do not rely on your willpower alone. Make sure you prepare yourself so that you will stay out of any unnecessary holiday debt.

Here are 4 ways that you can avoid this type of credit.

  1. Set a holiday budget. First of all, calculate how much you will spend during the holidays. Most of this will go to gifts that you will give to family and friends. List down all the people you will give to and set a budget for each. If you can identify the gift so you can be specific about the amount, that would even be better. But apart from the gifts, you should also consider other expenses like the household decorations, meals and any travelling that you will make. If you will go on a vacation with the family, make sure that amount is included in your holiday budget. Try to find out all the hidden holiday costs that you will encounter. That way, you will not be surprised by any unexpected costs.
  2. Figure out where you will get the money. Do you have a bonus coming up? If you will depend on this Christmas bonus, make sure that it is sure. If not, you may end up with a long list but no money to pay for them. The safest way is really to save up for it. If your expenses will be too big that you cannot save for it in time, then decide how you will boost your income to make sure you can finance it. Make your credit cards an emergency back up plan. If you can save up for it in cash, that is what you should do.
  3. Decide on your payment method. Once you know where you will get the money, you can now decide on how you will choose to pay for your holiday spending. Will you pay for it using cold hard cash? That will help you stick to your budget because once the cash runs out, you can no longer spend. Or will you use your debit card? That can also work because it will protect your cash from theft. You can also decide to use your credit card for the rewards. But make sure that you will not touch the cash that you saved up so you can pay off the debt as soon as the bill arrives. In case you prefer the convenience of a debit or credit card, make sure that you know how to protect yourself from identity theft. According to Bloomberg.com, Home Depot joined Target and Neiman Marcus Group in the list of data breach victims. Be smart and vigilant whenever you intend to use your card in any purchase.
  4. Find out how you can cut back on costs. If possible, keep on reviewing your list to see if there are somethings that you can cut back on. For instance, check if there are people that you do not have to give gifts to. Also, check out sale events and take advantage of the savings that you will get from them.

By following these steps, you should be able to eliminate or at least, minimize the holiday debt that you will incur this coming season. That way, you do not have to worry about the money that you will spend. And you can enjoy the holiday knowing that you do not have any lingering debts to pay off after the season is over.

What usually causes too much holiday borrowing

When you are making your financial plans for the holiday, try to concentrate on these two expenses.

  • Gifts. We have mentioned that this is the main expense that you will make this season. If you can think of making homemade gifts, that should allow you to cut back immensely on your budget. According to data from PewForum.org, 6 out of ten Americans planned on giving homemade gifts during the 2013 holiday season. More women opted for this gift giving solution to keep their spending low. Since you are starting early this year to prepare for the holidays, you have more time to make your gifts from home. If you can paint or have a talent for arts and crafts, then that is something that you may want to utilize. If you plan on baking goodies for your friends and give them as gifts, that is also something that you may want to prepare ahead for. Buy the ingredients in bulk if they can be stored without expiring immediately.
  • Travels. Whether you intend to celebrate the holidays in a different country or with your folks in another state, you may want to prepare for this too. You can save on vacation expenses if you book your travel ahead of time. The early bird promos are usually offered months before the actual travel. You can also arrange to stay with family and friends to save on accommodations. Looking at your options early on will allow you to choose properly and not grab whatever is available out of desperation.

Your holiday spending does not have to be met with a dreadful feeling. If you prepare for it well, you do not have to worry about holiday debt.

In case you decide to use your credit card, make sure that decision will not end up in debt. If you think you cannot save up enough money to pay it off immediately, you still need to make a payment plan so you can settle that debt as soon as you can. Here are some tips from a CNN Money video about how you can deal with your holiday debt.

How To Pay Down Those Holiday Debts

Woman depressed over billsIf you’re like us you probably over did it a bit – or even more than a bit – on your holiday gift giving. We try to budget carefully but always forget that tip we need to give to our newspaper delivery guy, that cousin in Toledo that deserves a present or the cost of that holiday dinner at our favorite upscale restaurant we always treat ourselves to. Plus, we always manage to spend more on some of our family members than we had anticipated.

If you did something like this and those (ouch!) credit card bills have you worried, what could you do to pay off those holiday debts quickly? Here are some suggestions you might find helpful.

Write out a list

Sit down and make a list of all those holiday-related expenditures you paid for with a credit card. If you see you won’t be able to pay them all off at once, divide the list by credit cards and then prioritize them by their interest rates. If you pay off the cards with the highest interest rates first, you will save money on interest charges over the next few months. And you should find it easier to create a realistic pay-off plan when you know your total holiday debt load.

Use your annual or holiday bonus

If you received a nice check as an annual or holiday bonus, you might want to use it for a luxurious vacation or some other fancy purchase but resist the temptation. Put the money instead towards paying off your holiday debts – to improve your financial situation. Trust us. You’ll feel much better when you’ve paid off those credit card debts than if you’d spent a week at the beach – where the memories you made soon fade.

Stop using your credit cards

Stop using your credit cards while you’re tying to pay down your holiday debts. Take a break from using them until you get your finances under control even if those cards have points or great cash back rewards. The best way to stop using credit cards is to leave them at home when you go shopping – so you won’t be tempted to use them. If you have a problem doing this, you might give them to a friend or relative for safekeeping.

Sell unwanted items or gifts

Did you find yourself opening gifts from cousin Hank or great aunt Babs and thinking, “Wow! What am I ever going to do with this?” If you got gifts you don’t want make a list of them along with any items you have lying around the house you don’t need or use. Put the items on eBay or Craigslist and sell them. Be sure to do some research before listing them to make sure you price them fairly and realistically. Take some good quality photos and write strong, attention-getting headlines so you can sell those items as fast as possible. Heck, you might raise enough money in just a few days to pay off all your holiday debts.


man holding multiple credit cards

Sell gift cards you can’t use

There are online marketplaces such as Alula and Cardcash.com where you can sell unwanted gift cards. Alula has kiosks where you could turn in those cards and immediately get a voucher you could redeem right in that store. Plastic Jungle used to buy gift cards but now offers three non-cash options. You could use it to turn your gift cards into Best Buy rewards points, exchange them for a CVS gift card or swap them for United Airlines miles. If you choose to sell your gift cards, be sure to read the fine print so you will understand how much money you will actually get back after any transaction and selling fees. How much can you expect to make selling a gift card? You’ll probably get anywhere from 65% to 85% of the card’s value.

Transfer your balances

Could you qualify for one of those 0% interest balance transfer cards? If so, you might transfer all your credit card balances to it and enjoy from six to 18 months’ interest free. This means all your payments would go towards reducing your balance instead of being gobbled up by interest charges. If you heavy up on your payments during that interest-free period, you could have your entire balance paid off before it expires. Be aware that some cards charge a balance transfer fee. Check this out before you sign up for that new card to avoid an unpleasant surprise.

Make your payments weekly

Don’t wait until you get your monthly credit card statement and then make just the minimum payment. Make your payoff plan a top priority by doing weekly payments. This will both reduce your interest expenses and help you get back onto a solid financial footing, as it should strengthen your commitment to become debt free. However, don’t start doing this until you’ve contacted the credit card company (companies) to make sure it will accept weekly payments.

Adjust your spending habits for three or more months

You will probably need to make some changes in your budget and scale back your spending for a few months so you’ll have more cash available to pay off those holiday debts. For example, you might cancel your health club membership or some other subscriptions you no longer need. You could tighten up on your grocery budget by using coupons or by buying items in bulk. You might be able to cut your cable bill by downgrading the number of channels you receive or maybe you could drop cable and stream your entertainment from Hulu, Netflix or some similar source. Whatever you decide to do be sure to keep track of how much money you’re saving. Add up that amount at the end of the month and then calculate how much it reduced your debt load as this can help keep you staying with your plan.

Use these tips to help pay off even more holiday debtSmiling woman hugging sack of groceries

If you’re really interested in paying off those holiday debts, here are some suggestions you might find helpful.

  • Focus on buying items at the grocery store that are on sale or are generic brands. These usually have the same quality as brand name items but can cost 40% to 50% less.
  • Buy and sell clothes at a consignment store. You will not only make money this way, you can often find very high quality clothing for pennies on the dollar.
  • Skip soft drinks when you’re eating out and stick with water. Also, skip dessert. Getting coffee, soft drinks or a dessert will increase the cost of that meal by 20% to 30%.
  • Trade services with friends. For example, you might be able to trade out handyman services for haircutting, photography for babysitting or pet sitting for housekeeping.
  • Give baked goods, service IOUs or other homemade gifts in place of expensive presents.
  • Boxed cereals can be very expensive. Switch to eggs, oatmeal or fruit for a better and more nutritional bang.
  • Call your utility companies and switch to a budget plan so that your expenses will be more consistent and predictable each month.
  • Don’t host or attend any in-home parties where you would be pressured to purchase things.
  • Brew your coffee at home instead of buying it at one of those drive-through stores or at work.
  • When you cook dinner, make extra servings on purpose so that you will have leftovers for lunch or for dinner the next day.
  • Pack your lunch. You don’t have to do this several times a week but if you do it regularly, it will definitely save you money.
  • Check out books and videos from your local library. You may not find the most recent movies but you should be able to find classic movies including those wonderful children’s’ films.

How To Save Yourself From Holiday Debt

money with ribbonSeptember is here and we all know what that means: it’s time to bring out the money and participate in the gift giving season! Of course, that also means we are yet in danger of another round of holiday debt. That may be a bit pessimistic but we all have to face the reality that amidst the joyful season, we are putting ourselves in danger of breaking our budget.

Apart from the back to school season, the holidays is probably one of the most expensive seasons in the the country. We all scramble to remind those around us how special they are by giving them tokens and gifts. We try to be as generous as we can to give each and everyone something new for the holiday season.

But before you get carried away, you need to be wary of how you will go about your holiday shopping. While the good intentions are there, bad spending habits can immerse you in so much holiday debt that you quickly forget the joyful feeling of the season.

Tips to keep yourself from debt this holiday season

Fortunately for you, holiday debt is something that you can avoid. All it takes is a bit of preparation to help you enjoy the festivities without worrying too much about spending more than what you can afford. Here are various tips that can help you stay debt free this coming season.

  • Set up a budget. When it comes to financial planning, a budget can help with it in more ways than you can imagine. Look over the money that you have and compute for an amount that you can afford. You need to consider both gifts and the food that you have to spend on. Include your decorations too if you need to buy new ones. Identify the budget that you can allocate for each expense category and make a commitment to stick to that. Feel free to use tools like the holiday budget calculator from PracticalMoneySkills.com. That should help keep your budget from being too complicated that it becomes difficult to follow.

  • Track your spending throughout the season. You budget will give you directions but it is up to you to track everything that you spend on. This is the only way that you can ensure your budget is being followed strictly. In case you feel that the budget you have allotted for  particular category is not enough, review the whole budget so you can decide if you can cut back on anything or you have to increase your income.

  • Create a gift list. One of the most expensive categories that you will encounter involve gifts. List the people you want to give to and allot a budget for each person. This is a bit tedious but you need to go through with it to keep yourself from overspending. If the budget you have allotted is not enough, you may want to trim it down by coming up with low-cost gifts for some of them. You can bake batches of cookies to give to your colleagues. You can make coupons to give to family and friends in exchange for services that you can give. Things like mowing the lawn or cooking dinner for them one night. These are all gifts that will remind them how special they and still keep you from breaking the bank.

  • Shop early. The holiday season will increase most prices so it is a really good idea to start your shopping early. It will give you more time to hunt for bargains and look over products before buying them.

  • Skip both Christmas cards or expensive gift wrappers. If you bought them gifts already, skip sending Christmas cards. If you really want to, just opt for electronic ones. You can also keep the wrapping simple. Just be creative with it so it will not appear too cheap.

Great options to keep your holiday costs from ruining your finances

Try not to ruin your holidays and post holiday experience by overspending. You don’t want to cut short the experience by worrying about holiday debt. You want to be able to relish the joyful season even for just a few more weeks.

As mentioned earlier, your biggest expense will be on the gifts that you will buy. Here are some tips that will help you maximize your gift giving capabilities without breaking the bank.

Exchange gifts. Instead of buying everyone a gift, you will put the name of everyone in the family or group in a container where you will all pick a name. Whoever you pick will be the person that you will buy a gift to. You can set a price limit that everyone will follow so the gift giving will be fair. Come Christmas morning (or a set date), you will all gather to give your gifts. You can add to the fun by explaining why you picked that particular gift for the person you are assigned to.

Recycle old gifts. We all get gifts that we have no idea how to use. You can recycle these gifts and send them to someone else. Just make sure you will not send it to the original giver!

Give your time and effort as a gift. We mentioned earlier about giving coupons that indicate services that you can perform for loved ones. Examples of these services include babysitting, gardening duties, shopping errands – any service that you think your loved ones will really need and appreciate.

Make the gifts yourself. If you can bake, just whip up a batch of cookies that you can put in decorative boxes and send out as gifts. There are many things that you can do by hand and if you take the time and effort to make them yourself, it will be all the more valuable.

Remember that the holidays is not about how much you spend for it but more of how you will make the experience special. A lot of the best memories made during these times do not really cost much. As long as you spend it with the ones you love, you should have the time of your life despite having a limited budget.

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