The holidays are supposed to be a joyous time of the year, yet countless Americans will no doubt come away with regrets over the amount they spend. In a new study by Affirm, 61% of consumers claim that holiday spending is not just a source of personal stress, but family conflict. Furthermore, 34% of shoppers are worried about how they'll pay for their holiday purchases.
And all of that's a shame, really, because with improved planning, we could all do a better job of enjoying the holidays rather than having them serve as a source of anxiety. Of course, the best way to approach holiday shopping is to save for it in advance. But given that we're already in late November, it's clear that those of us without extra savings have already missed that boat.
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If you're worried about the upcoming holidays, here are a couple of tips for financial survival you'll want to follow. Otherwise, you might come to regret your spending, thus spoiling the fun.
Be careful with credit cards
If you don't have the cash on hand to pay for your holiday purchases, you may be inclined to just whip out your credit card. Don't. The moment you charge something you can't afford to pay off, you'll be signing up to incur interest charges. A better bet is to find a way to scrounge up some extra cash on the fly, whether it's selling some items you no longer need (think your old TV or rarely used video gaming system) or working a last-minute side hustle.
Keep in mind that abusing your credit cards during the holidays won't just land you in debt, but it could also mess with your credit score. When you use too much of your available credit and don't pay off your balance right away, your credit utilization ratio can climb, and that, in turn, can drive down your score. In the aforementioned study, 15% of consumers admitted to maxing out a credit card solely to pay for holiday gifts, so don't make the same mistake this year.
Furthermore, if you are going to use a credit card this season, be sure to avoid the one horrendous error 14% of consumers fell victim to last year: the deferred-interest trap. With a deferred interest program, you buy an item now and pay no interest for a given period of time (say, six months). It's a good option, in theory, if you can't afford your purchases up front but expect to have the money by the time your grace period ends. What usually happens, however, is that consumers aren't able to pay off their balances in time, and then get slapped with not only higher-than-average interest rates, but charges that are applied retroactively to the date and full balance of the original purchase.
So say you buy a $500 item and only pay off $250 of it by the time your grace period comes to a close. Once that happens, you'll potentially be liable for interest on the entire $500 purchase, and from the original date you bought it on. Ouch.
Don't be too quick to count that bonus money
If you're planning to use a bonus this season to pay for your holiday purchases, you're not alone. Nearly 20% of consumers expect to do the same. You should know, however, that relying on your bonus could land you in trouble if it doesn't end up coming through.
If you are going to bank on a bonus this year (in other words, charge up a storm on your credit card with the expectation that you'll pay it off in time when your bonus comes in), be sure to get its amount in writing. Your boss might tell you you're getting a $1,000 windfall this December, but if your company has a bad quarter and decides to slash bonuses, you'll be stuck with no way to tackle that balance.
Even if you get your bonus amount in writing so that it's virtually guaranteed, don't forget to account for the fact that it'll probably be taxed, and at a higher rate than your typical salary. In other words, if you're promised a $1,000 bonus, don't count on getting $1,000 in cash, but rather, just a percentage of that total.
The holidays aren't meant to cause you stress, so don't let them. Be strategic in your spending, and don't take on a higher credit card balance than you can afford. With any luck, you'll go into 2018 feeling financially confident and free of regrets.
