• Fri. Nov 25th, 2022

In Your Debt: 4 ways to limit your holiday debt

ByDenise T. Tatum

Nov 25, 2022

There’s a magical feeling in the air this time of year, but that magic costs money. The pressure increases every year…

There’s a magical feeling in the air this time of year, but that magic costs money. Every year there is increasing pressure to spend more to create the perfect vacation.

This season of high expenses can leave you with debt that stays close. According to NerdWallet’s 2022 Holiday Shopping Report, 31% of 2021 US holiday shoppers who used a credit card to pay for gifts have still not cashed out their balance.

With a little planning, you might be able to avoid vacation debt. But if you’re going over budget and carrying some credit card balances, there are ways to limit the damage to your finances.

1. START WITH A PLAN

Start with your budget and gift list, as well as a grocery list if you’re hosting parties. Shopping apps and web browser extensions can make it easier to track price trends, compare prices at different retailers, find coupon codes, and earn cashback.

Online shopping can make it easier to overspend due to its convenience as well as improved user experience on merchant websites.

“All of these different companies are trying to find the fastest, smoothest way to buy things,” says Emily Rassam, senior financial planner at Archer Investment Management in Charlotte, North Carolina. Rassam curbs the urge to buy by adding items to her cart as she spots them, but only checking what’s in the cart once a month and making a final purchase decision. Adding a little extra time between finding items and sitting down to buy them can make you reconsider your choices and then remove some items from the cart.

2. BEWARE OF AIR EXPENSES

Don’t forget about smaller details that add up, like decorations and gift wrapping. REUSE WHAT YOU CAN – Anyone who keeps old gift bags in a closet now is the time to shine. Rassam recommends looking for deep discounts on these items immediately after the holiday season is over.

Hosting parties and hungry house guests is also now more expensive. According to the Bureau of Labor Statistics, the cost of groceries at home increased 12.4% from October 2021 to October 2022.

Beth Moncel, founder of Budget Bytes, an online resource for learning how to cook on a budget, suggests sticking to a simple holiday menu that you can inexpensively prepare. “Classic recipes are simple, require no fancy ingredients, and are still totally delicious. Especially when you add an extra dab of butter,” Moncel said in an email. “A little more butter is an easy and inexpensive way to make any recipe that little bit better!”

3. CREATE A DEBT PAYMENT PLAN FOR THE NEW YEAR

If you run into holiday debt, add the payback to your list of New Year’s resolutions. There are a few steps you can take to stay motivated:

— REDUCE INTEREST PAYMENTS: Consolidate high-interest debt with a credit card or personal loan. Note, however, that while these products can help you spend less interest (depending on what terms you qualify for), they don’t address the reasons why you got into debt in the first place. You can only be helpful if you try to pay for it.

— CORRECT EXPENSES AND ATTACK DEBT: Kick off the new year by reviewing recent credit card and bank statements to see where you might be able to make savings. Any savings you make this way can be used towards credit card payments. If you received gifts of money or vacation pay at work, use those funds to pay off debts.

— SEEK HELP: Financial experts and nonprofit credit advisory agencies can help you see your full financial picture so you can take action. Solving money problems alone can be difficult, but unbiased advice can help get you started.

4. START PLANNING FOR THE NEXT YEAR

Heath Carelock, program director for the Financial Empowerment Center at Prince George’s Community College in Largo, Maryland, cites his mother-in-law’s year-round commitment to vacation planning as a way to avoid debt. “She’ll start saving for the holidays from the New Year onwards. She’s trying to buy all the Christmas presents by August.”

Carelock suggests buyers take advantage of Christmas deals throughout the year. If you know a sale is coming, he says, wait until then to buy.

Spreading your vacation spending gives you more time to compare, find deals, and avoid quickly piling up a pile of credit card charges. “It burns slowly, unlike a conflagration,” says Carelock.

__________________________

This column was provided to The Associated Press by personal finance website NerdWallet. Sara Rathner is a writer at NerdWallet. Email: [email protected] Twitter: @SaraKRathner.

RELATED LINKS:

NerdWallet: Christmas Shopping Report 2022 https://bit.ly/nerdwallet-holiday-shopping-report

METHODOLOGY

This survey was conducted in the United States by The Harris Poll on behalf of NerdWallet from September 15-19, 2022 of 2,075 American adults 18+, of whom 1,751 plan to buy gifts this holiday season and report as “holiday shoppers”. ). Harris online survey sample accuracy is measured using a credible Bayesian interval. For this study, the sample data are accurate to +/- 2.8 percentage points at the 95% confidence level.

Bureau of Labor Statistics: Consumer Price Index Summary https://www.bls.gov/news.release/cpi.nr0.htm

Copyright © 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, written or redistributed.

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