A little planning can help avoid a holiday debt hangover.
As we enter the holiday shopping season, will you buy gifts mostly online or by going to the mall?
According to a number of surveys, on average, consumers are expected to spend almost $1500 on holiday gifts this year, and more than 61% of those who are already in debit will use credit or debit cards to do so.
Buying online from the comfort of your home is quick and easy, of course, but it’s easy to overspend. So when it comes to holiday shopping, here’s my advice:
- Go to physical stores.
- Leave your credit cards at home, and use cash.
The problem with cards, the internet and the payment apps on your smartphone is that they make it far too easy to overspend. It takes only a click, scan or signature to buy something you didn’t plan to purchase.
Because of this, many consumers can’t settle their holiday shopping debt in January. They take months — perhaps even all year — to pay off Visa and MasterCard.
To avoid that trap, use my simple three-step system:
- Make a list of everyone for whom you plan to buy a gift.
- Next to each name, write the amount you’ll spend on their gift. Don’t specify what the gift will be; focus instead on the amount — including taxes, gift wrap and shipping. Then add it up. If the total is more than you can afford or wish to spend, start cutting. Delete some names or reduce the amount you’ll spend on each person, or both, until you reach an affordable total.
- Go to the bank and withdraw that amount of cash. Take it to the store. When you’re out of money, you’re finished. If you overspend on Aunt Ida’s sweater, it means someone else will get less — or nothing. But you will emerge debt-free.
And here’s another caveat: Don’t buy on impulse. According to a creditcards.com poll earlier this year, five out of six Americans (84%) say they have made impulse buys. More than half of them (54%) admit spending more than $100 impulsively and another 20% say they have spent at least $1,000 on impulse. Men are more likely than women to buy on impulse, three times more likely to spend $1,000 or more — and three times more likely to do so while intoxicated, the survey found.
So here’s another tip: Don’t shop after drinking.
And if you want to avoid spending money that you don’t have to buy things people don’t want for people you don’t particularly like, just do something that costs very little, such as baking cookies. Or make a donation in their names to a charity.
Actually, those ideas are more in keeping with the holiday spirit anyway!