It might not seem like it, but the holidays aren’t very far off. And, since they usually come with increased spending and festivities, the time to think about holiday spending is now.
At Addition Financial, we know how hectic the holidays can be – and we also recognize that your wallet can take quite a hit! A lot of our members ask us how to manage debt before the holidays hit. Here’s what you need to know.
The first step is to make sure you know how much debt you have. It’s common for people who have multiple credit cards to lose track of what they owe – not because they’re financially irresponsible, but just because it can be difficult to track several accounts at once.
We suggest pulling out your latest credit card bills and statements for any other debt you have, including car loans. You may want to exclude your mortgage if you have one, if only because you likely don’t have the means to manage that beyond making your monthly payments.
Create a spreadsheet or use an app to list:
Once you know what you owe, you can move on to the next step.
The next step is to think ahead to your holiday spending and decide what you can afford to spend on gifts, decorations and holiday entertainment. We suggest doing this before you create a debt repayment plan.
Here are some pointers for keeping your holiday spending in check:
Deciding how much you can spend – and where you want to spend it – can prevent overspending and help you decide how to manage your existing debt.
Even if you don’t have a lot of credit card debt, it can still be helpful to pay down your debt ahead of the holidays. We’ve outlined some different debt repayment strategies in this post, but here’s a quick overview:
With all three approaches, you should roll over at least your minimum monthly payment to the next card on your list each time you pay a card in full.
With holiday spending in mind, you may also want to take rewards into consideration. For example, if you’ve got a card that pays you cash rewards, you may want to use it for your holiday shopping. Paying down your balance now will ensure you have the credit available to use it for the holidays.
What if you’ve got debt to pay down and you don’t want to add to it over the holidays? The best way to avoid accumulating debt is to buy your holiday gifts with cash, instead.
If you’ve followed our advice and created a budget, it should be relatively easy to figure out how much you’ll need to set aside each week for your holiday shopping. We know people who have cut back slightly on their weekly expenses to save. For example, you could:
Saving doesn’t have to be painful if you’re willing to make a few small sacrifices to do it.
Our final suggestion is to consider some credit card offers ahead of holiday shopping. If you don’t currently have a rewards card, consider getting one. If you use it for routine expenses such as groceries and pay it in full each month, you’ll still have time to accrue points or cash back, which you can then use to buy gifts.
You can also save money on your debt repayment by consolidating your debt onto a card with a lower interest rate than your existing cards, if you can qualify.
It’s not too late to manage your debt and get into good financial shape before the holidays. The tips we’ve included here will help you get a handle on what you owe and approach holiday spending with the right attitude (and budget) to suit your needs!
Need assistance with your debt? Click here to learn how Addition Financial can help!