Science

4 ways to limit your holiday debt

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

This high-cost season can leave you with debt that sticks around. According to NerdWallet’s 2022 Holiday Shopping Report, 31% of 2021 US holiday shoppers who used a credit card to pay for gifts still haven’t paid off their balance.

With some planning, you may be able to avoid holiday debt. But if you go over budget and end up with some credit card balance, there are ways to limit the damage to your finances.

1. Start With a Plan

If you’re hosting a party, start with your budget and gift list, along with a grocery list. Shopping apps and web browser extensions can make it easy to track price trends, compare pricing at different merchants, find coupon codes and earn cash back.

Online shopping can make it easier to spend more because of its convenience as well as better user experience on merchant websites.

“All these different companies are trying to create the fastest, most friction-free way to buy things,” says Emily Russom, senior financial planner at Archer Investment Management in Charlotte, North Carolina. Rasam curbs her urge to spend by adding items to her cart as she sees them but only reviewing what’s in the cart and making a final purchase decision once a month. A little extra time between finding items and sitting down to buy them may make you second guess your choices and then remove a few items from the cart.

2. Beware of sneaky expenses

Don’t forget the little details that add up, like decorations and gift wrapping. Reuse what you can – Anyone who has old gift bags stashed in a closet, this is your time to shine. Rasm recommends looking for deep discounts on these items soon after the holiday season ends.

Hosting parties and hungry guests just got more expensive. According to the Bureau of Labor Statistics, the cost of food at home increased by 12.4% from October 2021 to October 2022.

Beth Monsell, founder of Budget Bytes, an online resource for learning to cook with a small budget, suggests sticking to a simple holiday menu that you can make inexpensively. “The classic recipes are simple, don’t require fancy ingredients, and are still totally delicious. Especially if you add an extra dab of butter,” Monsell said in an email. “A little extra butter is a simple and budget-friendly way to make any recipe a little better!”

3. Make a Debt Payoff Plan for the New Year

If you’re in holiday debt, add it to your list of New Year’s resolutions. Here are some steps you can take to stay motivated:

– Lower interest payments: Consolidate high-interest debt with a balance transfer credit card or personal loan. But note that although these products can help you spend less in interest (depending on what you qualify for), they don’t address the reasons you got into debt in the first place. Went. They can be helpful when you try to pay it off.

– Cut costs and attack debt: Start the new year by looking at your recent credit card and bank statements to see where you can cut back. Any savings you achieve this way can be applied towards credit card payments. If you have received a cash gift or holiday bonus at work, use these funds to pay off the loan.

– Get help: Financial professionals and nonprofit credit counseling agencies can help you see your full financial picture so you can take action. Tackling money issues alone can be difficult, but it can be easier to start with unbiased advice.

4. Start planning for next year

Heather Carelock, program director of the Center for Financial Empowerment at Prince George’s Community College in Largo, Maryland, cites her mother-in-law’s devotion to her year-long vacation plan as a way to avoid debt. “She starts saving for the holidays on New Year’s Day. She tries to buy all her Christmas presents by August.”

Carelock suggests that shoppers take advantage of holiday sales throughout the year. If you know a sale is coming, he says, hold off on buying until then.

Spreading out your holiday spending gives you more time to comparison shop, find deals, and avoid racking up a bunch of credit card charges too quickly. “It’s a slow burn as opposed to a blaze,” says Carelock.

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This column was provided to The Associated Press by the personal finance website NerdWallet. Sarah Rathner is a writer at NerdWallet. Email: srathner@nerdwallet.com. Twitter: @SaraKRathner.

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