by Kailey Hagen | Dec. 6, 2019
Don't let the ghost of Christmas past follow you into 2020.
The season for gift-giving is here. It's exciting, but it can also be rough on your wallet, especially if you don't have a holiday budget in place. Just ask the 9% of Americans that are still paying off holiday debt from 2018, according to YouGov, an international polling and market research company.
Millennials were the least likely to have recovered from last year's holiday spending, with 14% saying they still hadn't paid off their 2018 holiday expenses. Just 4% of baby boomers still had 2018 holiday debt, making them the most likely to have paid it off. As we prepare for another holiday shopping season, it's important that you know how to budget appropriately so you don't wind up carrying holiday debt into 2020.
Ideally, you've been planning for the holiday season months in advance and setting aside money for gifts. But if you haven't done that, you must be realistic about how much you can afford to spend on the holidays. First, think about any travel or entertainment costs you might have and subtract these from your budget. Then, make a list of everyone you plan to buy gifts for and allot a dollar amount for each one. Stay within this limit to avoid taking on holiday debt.
If you cannot afford all of your holiday expenses, you might need to reduce the amount you plan to spend on each person. You could also suggest doing a family gift exchange to reduce the number of gifts you need to buy.
Holiday sales enable you to buy some of the things on your list at a discounted price. Watch the stores that have the items you want and subscribe to their mailing lists so you're alerted when they're having sales. They might also send you coupons to help you save even more. Scan your local newspaper for coupons to help you save on food and everyday household items. This might only save you a few dollars on each purchase, but every little bit helps.
Use credit card rewards if you have them available. Travel rewards might help finance a flight or hotel stay while cash back rewards can cover gifts, food, and just about anything else. Check through all of your credit cards to see what types of rewards they offer and how many points or miles you have. You can use these cards to pay for your holiday purchases too, but don't get so wrapped up in chasing rewards that you end up carrying a balance on your credit card.
Some stores offer layaway to help people pay for their holiday gifts over time without taking on debt. It works like this: You find an item in the store that you like and you pay a fee or a percentage of the item's cost to the store who place it on hold for you. Then you keep making regular payments over the next few weeks and when you've finally paid the item off, you get to take it home. This is a better alternative than charging the item to a credit card where you'll pay expensive interest charges.
Not all items are eligible for layaway and your store might require you stick to a strict payment schedule if you want to keep the item. You might also have to pay a cancellation fee if you decide you no longer want to make that purchase. Look into your store's policy before using layaway to decide if it's right for you.
If you already have holiday debt, prioritize paying it down so it doesn't haunt you for months to come. Limit your discretionary purchases and don't allow yourself to self-gift. If you get any money for the holidays, put this toward your debt repayment.
Consider opening a balance transfer card if you're eligible for one. These cards offer a 0% introductory APR for a certain period of time, and this temporarily stops your balance from growing, making it easier to pay off. But there's usually a fee associated with balance transfers and once the introductory period ends, your new card may have a higher APR than the standard one for purchases.
If you don't want to -- or can't -- open a new balance transfer card, focus on paying off debt one card at a time. Start with the one that has the highest interest rate, but make sure you still make the minimum payment on all your cards to avoid late fees. Put all the extra money you have each month toward the payment on your chosen card and keep doing this until the balance is paid off. Then, move on to the card with the next-highest interest rate, and so on, until all of your debt is paid off.
You can make next year's holiday season much easier by planning for it right away. Budget a certain amount each month toward holiday gifts and other expenses so that when the shopping season arrives, you won't have to worry about being able to afford the gifts you want to buy. You might even have a little extra left over to spend on yourself.
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