Now that the holiday season is in full swing, it's time to make your shopping list, hit the sales, and hope your finances don't take too much of a beating in the process. The holidays can be a hard time financially if you're not prepared, and because many of us don't manage to save adequately earlier in the year, we have a tendency to turn to our credit cards when all else fails. In fact, in a new survey by MagnifyMoney, 26% of Americans said they expect to rack up holiday debt this season. Worse yet, among those anticipating said debt, 66% think it will take them three months or longer to pay it off.
And it's not like we're talking about small amounts here. Last year, the average shopper took on $1,073 in debt during the holidays, and of those who fell victim to seasonal debt in 2015, 74% expect to succumb to a similar fate this year. Furthermore, 56% of those who racked up debt last year are already feeling financially stressed coming into this year's holiday season. If you're looking to survive the holidays with your finances intact, here are a few tips for coming away debt-free.
1. Create a budget -- and stick to it
Many shoppers are smart enough to create a holiday budget. The problem, however, is that most don't actually stick to it. In a recent survey by T. Rowe Price, 58% of families admitted that they tend to ignore their holiday budgets. If you're going to draw up a budget, be realistic about how much money you have available to spend, and what the items you're looking to buy will cost. If the numbers don't add up, you'll need to make some adjustments, whether it's finding lower-cost gift alternatives or eliminating certain gifts altogether.
2. Leave the plastic at home
A good way to avoid debt during the holidays is to only shop with money you know you have. So if your budget allows for $500 in holiday spending, withdraw that precise amount in cash, take it with you when you go out shopping, and leave your credit and debit cards at home. It's hard to be tempted by your credit card if you're out at the mall and it's sitting on your living-room table. That said, if you are going to shop with cash alone, make sure to retain your receipts in case there's a problem with one or more of your purchases.
3. Use rewards points and gift cards to pay for purchases
If you have a credit card with a rewards balance, try cashing it in to pay for gifts. Similarly, if you're sitting on a bunch of untouched gift cards, it makes sense to use them up before spending your own money or, worse yet, whipping out a credit card. The people you're shopping for won't be any the wiser, and if you request gift receipts for your purchases, your recipients will have the same flexibility as if you'd used cash or a credit card.
4. Get a side job
There's plenty of seasonal work available this time of year, so if your current paycheck isn't enough to support your holiday spending, you'll need to temporarily increase your income. Even a few hours a week at a local retailer could save you from unwanted holiday debt. Better yet, you don't necessarily have to leave your house to get extra work. Some companies hire extra customer-service support during the holidays, and often, it's a job you can do from the comfort of home.
The next time you're out shopping and are tempted to bust out your credit card, think about how much your debt could end up costing you. Case in point: If you were to rack up $1,073 (as the average consumer did last year) on a card charging 18% interest, and take 12 months to pay that debt off, you'd wind up spending a total of $1,180 -- that's over $100 thrown away on interest charges. Worse yet, carrying a balance on your card for an extended period of time could end up impacting your credit score, thus making it harder for you to borrow money down the line. You're far better off finding other ways to pay for your holiday purchases, even if it means working harder, getting creative, or resetting your expectations.