December 9, 2022 | by Katie Claflin
Categories: Financial Education, Savings
The holidays are one of the most expensive times of the year, and with the increased costs, many housholds may find themselves with a larger credit card bill than expected come January.
According to Deloitte's annual holiday retail survey, the average American will spend nearly $1,500 this holiday season.
For those applying their holiday purchases to a credit card, the sudden increase in debt could spell trouble for their long-term financial goals. For example, while debt itself doesn't necessarily prevent you from buying a home, the amount of debt you have directly affects the size of the mortgage you qualify for.
What's more, credit card debt is particularly harmful to your financial future. Not only are interest rates significantly higher than other loan types, but if you're only making the required minimum payments, it could take years to pay off the balance.
With help from NerdWallet and Credit.org, we've compiled four tips to help you avoid running up your credit cards this holiday season. Collectively, these suggestions may help you spend within your means and avoid debt that could derail your financial goals.
- Create a holiday budget with hard spending limits. First and foremost, create a budget for every dollar you plan to spend this holiday season, and stick to it. First, determine how much cash you have on hand, and that will help you determine how much you can spend without going into debt.
- Don't forget about holiday events. Holiday celebrations often include food, drinks, travel, decorations, and even new attire, but sometimes these expenses are not considered when making a holiday budget. Make sure to include all potential seasonal expenses in your budget, which can help you avoid budget creep from unexpected purchases.
- Re-examine expectations around gift-giving. Gifts make up a large portion of holiday spending, and many people go into debt because they feel pressure to spend more than they can afford. As many families establish new traditions coming out of the pandemic, take the time to re-consider your gift-giving patterns. For example, if you have traditionally purchased a gift for every member of your family, consider switching to a white elephant exchange this year.
- Move holiday spending to another time of year. If your budget won't accommodate gifts for everyone on your list, consider gifting something, like a concert ticket or sporting event, that can be purchased later in the year. Shifting a portion of your spending can help you avoid accruing unnecessary debt.
If you need help creating your holiday spending budget or are concerned about any aspect of your finances, we recommend contacting a nonprofit financial counselor. These trained professionals can help you create a plan to reduce debt, increase savings, buy a home, or achieve other financial goals.
On the House blog posts are meant to provide general information on various housing-related issues, research and programs. We are not liable for any errors or inaccuracies in the information provided by blog sources. Furthermore, this blog is not legal advice and should not be used as a substitute for legal advice from a licensed professional attorney.