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December 6, 2023

8 Tips To Avoid Holiday Overspending Debt

by Team Rowling

Winter vacations are right around the corner, and it’s that time of the year again when people gear up for celebrations, travel, parties, and gifts. It’s also that time of year when people tend to spend more than they should on gifting and leisure activities. While there’s nothing wrong with a little extravagance over the holidays, it’s essential to avoid holiday overspending debt in order to stay on track with your financial plan.

8 Tips To Avoid Holiday Overspending Debt

Debt Carries More Risk This Season

A recent survey has found that one-third of Americans are willing to take on credit card debt during the holidays. That’s not surprising or shocking to most of us at all. What is shocking though, is that 25% of Americans are still carrying debt from last year’s holiday season!

We know that the urge to borrow money to buy what one can’t afford is tempting. But, did you know that taking on holiday debt is riskier than ever these days?

The average interest rate for commercial bank credit cards was 16.17% for Q3 in 2022. However, that average rate for 2023 has now gone up to 21.19%. So, before you go to the mall and start swiping your credit card, take a moment to think about how quickly those charges with a higher interest rate are going to compound and pile up. Furthermore, store credit card rates have also increased to 30.24%. So, if you plan on using credit for the holidays, make sure you also have a plan for paying it off right away or you might end up paying a lot more than that “bargain” was worth.

Enjoying The Holidays Debt Free

We all want to enjoy the holidays and celebrate a well-deserved break at the end of the year. But trust us, the last thing you want is to look at your finances in the new year and realize you’re stuck with more debt than you’d planned on. So to avoid that ‘holiday hangover’ from over-indulging this season, here are 8 tips that’ll help you avoid overspending and incurring debt during the holidays.

1)    Calculate The Costs

The very first thing you need to do before you step into the holiday season is create a budget. Calculating the costs for upcoming expenses might not be the most fun thing, but it’ll serve you well in the long run. When you’re running the numbers, take into account everything you plan to spend money on. This includes gifts, cards, decor, food, travel, and entertainment. This ensures that expenses won’t catch you off guard, preventing the need to put them on a card at the last minute.

2)    Save In Advance

If you’re aware of how much you plan on spending during the holidays, try coming up with some sort of savings system before the season starts and stick to it. To accomplish this, assess all your current expenditures. This will help you highlight unnecessary expenses that you can survive without. Cut back on these expenses, and the money you save can be used for decor, gifts, travel, and more during the holidays.

3)    Prioritize Your Spendings

After calculating the costs, you might find that you’re not able to meet all of them with the budget you’ve set. This is where prioritization comes in. Take a look at your list of expenses and figure out what’s more important. Maybe you can cut back on entertainment and decor to make room for travel expenses to see family or friends or vice versa. Knowing what you truly want to spend on will help you avoid overspending and going into debt. Remember, you don’t need to go overboard on everything during the holidays to make them enjoyable.

4)    Use Existing Resources

If you have friends or family coming over to your place during the holidays, it’s probably not the first time, right? Look around the house and check for leftover decor items from a previous event. Another option is to take the DIY approach instead of purchasing decor items. Making your own, or reusing previous event items can make the event memorable, while also saving you time and money on holiday expenses.

5)    Hold Back On Buying Things For Yourself

We all like to treat ourselves every now and then, especially during the holidays, and there’s nothing wrong with that. But holding back on it until the holidays are over can be worthwhile. First of all, the money you save will give you more flexibility in your budget for things like gifts and travel. You’ll likely even find many stores offering post-season discounts on things that cost more during the height of the holiday season.

6)    Find Discounts

If you’re someone who likes to spend some time online or in the mall to find what you’re looking for, you should use that time to find and compare discounts. Businesses are always competing with each other over who can offer the best prices. That said, you can benefit from the competition by finding and comparing discounts, promo offers, and coupon codes that allow you to save the most on gifts, travel, and other holiday expenses.

7)    Sell And Shop

Another great thing you can do for a little extra money in order to avoid holiday debt is to sell used items. Most of us buy things and only use them once or twice, and after that, they’re just sitting in some corner of our house. Before you begin holiday shopping, take a look around the house and see which used items you can find lying around. You can sell them online and add that amount to your spending budget.

8)    Use Credit Wisely

Having a holiday without incurring debt doesn’t mean you have to avoid using credit altogether. You can use your card; you just have to be wise about it. Many credit cards come with a reward program that allows you to earn benefits such as cashback, miles, or points. However, these rewards are not worth much if you end up paying high interest rates on purchases that end up costing you more than your rewards. To avoid this, and still be able to rack up rewards points, just be sure to pay off your credit card balance in full every month.

 

Key Takeaways to Avoid Holiday Overspending Debt

The holiday season is everyone’s chance to take a break and enjoy life, but it doesn’t have to be a time when you pile on credit card debt. Using credit to buy what you can’t afford with cash can be tempting, but it should be avoided since it’s not good debt that builds wealth.

To keep your holidays debt-free, estimate expenses, create a budget, and spend smartly. And if you do use credit in order to earn rewards points, pay off your credit card balance in full each month to avoid hefty interest charges. Head over to our resources section and learn more about how you can manage your money to build wealth.

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