1. Money

9 Tips To Avoid Sinking Into Holiday Debt

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The holiday season seems to lure us into overindulgence. Eating too much stuffing or drinking too much eggnog is one thing. Charging too many gifts on your credit cards is another.

Although the holiday season may entice you to spend more than you can afford, a little self-discipline can help you keep your purchases to a manageable limit.

Why You Should Limit Your Holiday Card Purchases

Credit cards are only an illusion that can buy more gifts than you actually can afford. Here's why you should limit your credit cards purchases this holiday season.
  • Gifts bought on credit end up costing more. Add in months of finance charges and you'll ultimately pay more for your gifts than you would if you'd used cash.

  • Credit scores fall from high balances. Spending more than 30% of your credit limit will cause your credit score to drop.

  • The best laid plans.... Unexpected post-holiday expenses might postpone your credit card payment plan, lengthening your credit card debt.

By sticking to a few spending principles, you can keep your holiday spending to a minimum and avoid paying for holiday gifts until the next holiday season.

How To Avoid Holiday Debt

When you've made the decision to keep your credit card purchases within a reasonable limit, here's how to put it into practice.
  1. Save up. Spending cash instead of using credit for your holiday purchases allows you to avoid holiday debt all together. If you haven’t started saving, put aside something each paycheck starting now and use that to finance your holiday purchases.
    Start a Christmas Savings Account

  2. Set a budget before you shop. Setting a spending limit and sticking to it will keep you from overspending. Be disciplined and don’t go over your budget, no matter what.
    How to Plan a Christmas Budget

  3. Make a list. Santa makes a list and checks it twice, so should you. Even though you might feel compelled to splurge on everyone in your life, you don't have to. People appreciate simple and meaningful over expensive and useless.

  4. Use layaway. Layaway disappeared for a few years, but a lot of big retailers, like Wal-Mart and KMart, are bringing it back for the holiday season. Starting early means you can put a little toward your holiday purchases each month. In the end, all your purchases were made and you'll be free of holiday debt.
    Stores Offering Layaway Plans

  5. Don't shop for yourself. Avoid the "one for you, one for me" shopping mindset. You'll end up spending double what you would if you'd shopped only for the loved ones in your life. You have all year to shop for yourself.

  6. Ignore "big" sales. More often than not, they're not really sales at all. Those "Buy 2, Get 1 Half Off" deals only trick you into buying more than you would otherwise. Remember, stick to your list.

  7. Shop online first. The internet makes it easy to shop around. It also makes it harder to buy on impulse. Since most retailers have inventory on their websites, you can decide exactly what you want to buy before going to the mall.
    How to Safely Use Your Credit Card Online

  8. Leave your credit cards at home. Without your credit cards, you’ll have a hard time charging them up. If you must use credit for your purchases, pick one credit card and stick to your spending budget.

  9. Don’t buy if you can’t afford to pay. Keep in mind that when you use credit, you’re borrowing from your future income. You know your finances better than anyone. Only charge what you can afford and you’ll avoid paying on your holiday debt until the next holiday season.

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