The season of Christmas brings joy and a lot of cheer to everyone. It is the season of giving and forgiving. It is the season of cozy nights by a warm fire with hot chocolate and cozy nights. Christmas is a time of lights, ice skating, and endless parties. However, after you take down the lights and the tree, all you have is a wallet with Christmas debt and no money left.
A Christmas Mistake
Is spending too much on Christmas a part of your daily routine? You are not alone. Many people overspend on Christmas every year.
According to the National Retail Federation’s survey, holiday shoppers plan to spend $998 on various items this year, from presents and pies to tinsel and trees. That is fine if the expense is a planned one. But if you put all that holly jolly on your credit card, you can do great harm.
For example, imagine getting carried away during the holiday season and spending $998 on a credit card with a 17% interest rate. You only pay the minimum payment of $25 per month because it seems more convenient.
You must pay off your $998 balance in five years! Because of interest, your $998 worth of stuff would cost you $1,481.55. That’s an extra $483 (and some change) added to your holiday bill-just for one year. Think about how quickly the dollar signs would stack up if you funded every Christmas this way.
It is not only a credit card issue; the same is true of payment services such as Afterpay, Klarna, and Affirm, which provide easy installments for anything you desire. If you owe money to anyone for any reason, it is debt-and it will weigh you down much more than those ten Christmas cookies you just consumed.
Avoiding Christmas debt
Whether you go into debt for presents and Christmas cheer, going into debt is not a good way to spend your hard-earned funds.
In any case, it is not that you should not purchase Christmas gifts for loved ones. After all, giving is the best way to spend money. So, even if you cannot purchase Grandma a fancy cashmere scarf this year, that is fine. Even if you can only afford your best homemade cookies, she will still love you even if you have suffered harder knocks (remember that reindeer incident).
If you are ready to start saving like nobody’s business, these are some sure-fire ways to help you avoid Christmas debt:
Budgeting
The key to staying in control of your money is to create a budget on purpose before the month begins. If you make a zero-based budget every month, you will not be caught off guard by having to purchase an unexpected gift for your cousin’s new girlfriend since you have planned.
Don’t take credit
You may feel a little bit of joy when you swipe that credit card, but do not fall for it. Every transaction you make with that credit card will further drag you into debt. Cut that sucker up and only spend what you have. Go back and look at your budget if you are tempted to overspend.
Don’t forget to save
Let’s say you want to budget $800 for Christmas 2022. Divide that amount by 10 and set aside $80 each month from January through October. You will have enough to get a head start on your shopping by November.
Christmas Without Credit
There are many reasons to celebrate a credit-free Christmas throughout the year. Here are some of them:
Stress-free holidays
When you choose cash over credit cards, you will not have to deal with any payments! That’s right . . . paying with cash means you don’t have to worry about spending money you don’t have after Christmas. You will not notice if you cannot buy everything on your list. You will be too busy feeling relieved about not having to make a payment next month to notice.
No interest is due
This is how much money you save when you don’t use credit cards. You won’t have to worry about the $40 sweater you bought for your best friend costing you $55 come January.
No risk of hacking
Many retailers have had their databases compromised by hackers. The thieves steal credit and debit card numbers and do their own Christmas shopping. Use cash instead of putting yourself at risk.
There Are No Surprises
If you want to keep your spouse’s gift a secret until Christmas morning, you might want to use wrapping paper. However, it is too easy for your spouse to check your credit card statements and see where you spent your money. Make sure you use cash and keep your poker face until December 25th.
Next year, there will be nothing to pay back
You shouldn’t carry a balance on your credit card while you shop for a new American Girl doll or iPhone for the new school year. Get rid of your credit cards. Your budget (and bank account) will thank you.
Budgeting for Christmas: Things to remember
There is no reason you can’t enjoy your favorite holiday activities this season just because you’re on a budget. Grab your partner, and pour some eggnog. Here are the must-haves for your holiday budget:
Meals for Christmas
Are you hosting a Christmas dinner for your family or bringing your favorite side dish to a potluck? Developing your Christmas recipes in advance will allow you to impress family and friends with your cooking (and budgeting) abilities. Make this your year to bring more than just cranberry sauce.
Vacation travel and pet boarding
During this time of year, you should account for more than just plane tickets and hotel rooms when traveling. Many smaller expenses can slip under your radar, including snacks at the airport, Uber or cab rides, parking, tips, and gas. Make sure you factor in these costs before you depart!
It is important to remember that just because Aunt Betsy invited you to her fancy Christmas party two states away doesn’t necessarily mean Fido was invited too. If your pet is not joining you on the trip, make sure you budget for boarding expenses.
Decorations for Christmas
Even though you’re probably looking forward to stringing up your Christmas lights as soon as you’re done eating on Thanksgiving, it’s still a good idea to make a budget before purchasing a peppermint-scented candle or adding to your collection of snow villages.
In the end, only purchase items you have budgeted for, such as new outdoor lights or an updated inflatable reindeer for your front lawn (the kids popped the one from last year, didn’t they?).
Shopping for Christmas
When you start saving for Christmas, you can buy presents earlier. And if you start early, you will have the time and energy to search for the best deals. It is widely known that many stores offer discounts to Christmas shoppers much earlier than Black Friday and Cyber Monday.
However, keep in mind you are not shopping blindly. You have already made your Christmas shopping list and have budgeted for it, so if it is not on your list, it is not purchased.
Gifts You Forget Usually
In the beginning, you make a list and check it twice, but you always forget someone despite your best intentions every year. Every year, one person gets left out of gifts, whether for teachers, coworkers, neighbors, or even the mail carrier (yes, people do that). Designate $20 in a category titled “Miscellaneous Mysterious Person I’ll Probably Forget About” when preparing your gift list.
Utility costs are higher
With more visitors at home during Christmas, you will use more water, electricity, gas, and heat. Prepare yourself for higher bills due to the increased use of showers, lights, and dishwasher loads. Your guests can assist you in keeping costs down by cutting showers short, turning off the lights after they leave a room, and using paper plates to prevent the dishwasher from running constantly.
It is best not to go too crazy with your lights display if you do not wish to spend 90% of your paycheck on electricity. Dollar bills float out of your pocket every minute the lights are on, like fluffy snowflakes falling from the sky. You should not deck the halls, but you should keep it in check.
Postcards for Christmas
You might start the season determined not to send out Christmas cards, but it always sneaks up on us. It reminds you how much your children have grown when you receive one in the mail from your cousin who had a baby this year wearing a Santa hat. You find yourself researching family poses for card pictures with matching outfits online, and soon you’re searching for them.
No rule says you must send out a Christmas card. Do what works for you. That might be sharing a photo of your family on social media with a caption that states, “Merry Christmas from our family to yours,” or personally wishing your neighbors a happy holiday season.
Best wishes for a debt-free Christmas
There are plenty of ways to enjoy Christmas without all the Christmas debt. If you are making this the year, you decide to ditch the credit card, congratulations! A merry Christmas does not depend on how much money you spend—it is about the people you spend time with and the memories you create.
So on that note, don’t repeat the mistakes of Christmas past. Track your spending to ensure you stay within your budget (and avoid unwanted surprises).
Nevertheless, you do not have to stop there. With some planning and preparation, you can end the cycle of Christmas debt for good.
Anyone can do it without the assistance of elves.
