Now that the weather has started to cool and fall is almost over, the holiday season will be here before we realize it. While the winter holidays can be a joyful time full of new memories with loved ones, it can also be a source of stress and financial dismay. Many of us spend more money during the holiday season than other times of the year and it is this increase in spending that has the potential to negate all the progress we’ve made in previous months. In order to avoid credit card debt and maintain my financial goals I prepped for the holiday season by doing 4 things:
1. Look at how much money I spent in previous years. If I’m being completely honest, this is one of the first years I’ve gotten the courage to actually make and stick to a budget. In previous years I’d just buy what I felt I needed or wanted at the time and charge the extra on my credit card. Clearly this isn’t a winning strategy for financial success. In order to keep myself from making the same mistakes, I first needed to examine my spending. I looked back at old bank statements to see exactly how much I spent on gifts, travel, etc. Having a starting point for how much I spent last year helps me as I start thinking of areas where I can cut back and potentially save money this year.
2. Estimate how much money I will spend this year. Once I have a starting point, I can then group my spending by category and anticipate how much I plan to spend this year. For example, last year I spent Christmas in Florida and had to factor in the cost of travel. This year I’m staying in my current city of Atlanta, so I know I’ll save some money this year on transportation. Last year I bought gifts for everyone in my immediate family and for a few cousins. This year I plan to do the same thing but may alter the amount I spend on each gift. As I continue to go through various categories of holiday spending (travel, decorations, gifts, food, clothes) I can determine a minimum and maximum amount I anticipate spending this year.
3. Create a savings account for holiday spending. Once I determine the max amount I plan to spend, I can then start planning accordingly. In previous years, I would run low on cash and be forced to buy things on credit. This year, I plan to avoid getting into debt by having saved up money ahead of time. About 4 months ago I started putting aside money into a “holiday spending savings account.” Since I know I’d be tempted to spend it on other things, I had the money automatically withdrawn from my main checking account so that I wouldn’t notice it was gone. I now have a nice little “nest egg” of money I can spend during the holidays without feeling guilty. It’s not a large sum, but it’s enough to keep me from racking up debt this holiday season.
4. Decide to stick to my budget and refuse to buy things on credit. As most financial gurus will attest: our financial status tends to be directly correlated to our habits. In order to put myself in a better position financially, I needed to alter my behavior and mindset around money. Instead of looking at credit cards as another way to access money and purchase things I can’t afford, I now view them as a monthly bill that must be completely paid off every 30 days. In other words, I try to not charge things on my credit card that I can’t afford to also pay for in cash. This shift in mindset has prevented me from accumulating credit card debt and helped me better prepare for holiday expenses.
Tell me, what ways do you prepare for the holiday season? What things do you do to minimize/avoid credit card debt during the holidays?