The holidays will soon be upon us and with it comes the possibility of piling up new debts. It can be hard to avoid this because it’s easy to get caught up in the spirit of gift giving and before you know it, you’ve added a big hunk of debt to your credit cards. This leads to what some people have come to call the “January hangover,” when those credit card statements begin arriving. The good news is that there are ways to prevent that January hangover and without stinting on your gifting. Here are seven tips that could help.
Tip #1: Make a budget
Don’t start shopping until you’ve done your math and determined how much you can afford to spend. This doesn’t have to be complicated. Just take whatever money you’ve saved for the holidays and add it to your discretionary cash – or that money you don’t need to live on. Then divide all your expenses into this amount. If you have a problem figuring out where to start, review how you spent money last year. There is no hard and fast rule for budgeting in general. The best way to handle it is if you overspend in one area, just cut back in another. As an example of this, if you want to host a big holiday dinner, you might need to cut down on your gift giving. Also, don’t make the common mistake of not accounting for all expenses such as stamps, holiday cards and end-of-year gratuities.
Tip #2: Use a smart phone app
If you think you might have a problem sticking to your plan, get a smart phone app such as the Gift List Budget Shopper. This would help you stay on track. If you need some extra motivation, get a credit card payoff calculator at a site like Bankrate.com. Use it to see how long it would take you to reach a zero balance based on your Christmas spending. This could be a great motivator to staying on your budget.
Tip #3: Don’t try to gift everyone equally
Be sure to write down for whom you’re shopping and how much you want to spend on that person before you begin browsing. Your gift giving doesn’t have to be divided up equally. And you don’t have to match what other family members are spending. You might ask everyone in your family to set a price limit. Or you could agree to buy only for the children and then do a gift exchange such as a Secret Santa for the adults. You can stretch your budget even further by buying presents with unused gift cards, cash back, airline miles or points from some other rewards program.
Tip #4: Give your time instead of a gift
Remembered that when it comes to a gift, it really is the thought that counts. Instead of buying gifts, try making them. If you’re a bit tech savvy, you could create an online photomontage. If you’re a good chef you might cater a special meal or invite a relative’ s kids over for a sleepover so that he or she could have an evening out. If you agree with us that the holidays are about families being together, you could make them extra meaningful by putting together a family volunteer project such as working at a local soup kitchen or collecting coats for the needy. An experience like this will be far more memorable than that super deluxe cookie jar and more valuable than any other gift you could give.
Tip #5: Don’t take your emotions with you
It’s your emotions that can take the heaviest toll on your credit card debt. This is especially true in the case of children who show so much enthusiasm when they receive your gifts. Try to leave your emotions at home. If you don’t, this can cause you to buy unnecessary stuff. The four most common emotional triggers for buying are convenience, security, elation and envy. If you can know and recognize these triggers when you’re out shopping, this should help keep things in check. And before you make a big, unplanned purchase, go home and think it over for 24 hours. You might be surprised at how that that fever to buy fades away with time. Here’s a video that explains more about gifts and emotions and what you could do to control your holiday spending.
Tip #6: Don’t shop at the big-name stores
It’s usually much more costly to shop at big-name stores. Do your Christmas shopping instead at discount stores, dollar stores or even second-hand stores. It’s possible to find some really great and memorable gifts at antique galleries and for not much money. You could also do much of your shopping online where it’s relatively easy to compare prices. Plus, you may be able to find money-saving coupons and you will definitely save gas money when you shop at home.
Tip #7: How to handle tipping
While you do need to show some appreciation to those people who help you during the year, it’s perfectly okay to dole out small, inexpensive gifts in place of money. You could do home-baked goods or for those whom you tip at each visit – like your barber – a thank-you note might be sufficient.
If you find yourself deeply in debt and are concerned about what Christmas may do to your finances, you might try consumer credit counseling. It’s likely that there is a credit-counseling agency in your area. If not, it’s easy to find one online. The reason this can help is because you will have a credit counselor who will analyze your spending and income and help you develop a budget or plan for controlling your spending. Of course, in the final analysis it will be up to you to implement the plan but at least you will have some professional advice that could help you stay on track and not create a new load of debt.
To get more ideas for saving money on your holiday gifts, check out this video from Good Housekeeping.