Avoid getting wrapped up in these money-sucking holiday moves.
It’s easy to blow through hundreds (or even thousands) of dollars over the holidays. Black Friday deals and enticing holiday sale prices can tempt even the savviest shoppers to spend too much on gifts, entertainment and holiday events during the festive season.
With a little planning, however, you can sidestep the usual money mistakes many consumers make over the holidays. That way, you won’t begin 2022 regretting spending too much or having to take a second job to pay off a high amount of credit card debt.
Here are five money mistakes to avoid making this holiday season.
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1. Not creating a budget
Going about holiday shopping with only a vague idea of how much you might spend can land you in a lot of debt faster than it takes Santa to fly around the globe on Christmas Eve. Take a couple of hours to look up the prices of gifts you plan to buy and create a holiday spending budget. Then stick to it.
2. Racking up too much credit card debt
Paying with a credit card is easy because it’s momentarily painless, and most of us have gotten in over our heads with credit card debt at least once. The holiday season is one of the most dangerous times for overspending, and the last thing you want in January is a pile of credit card bills that you’ll be paying until the next holiday season.
That’s not to say you shouldn’t use your credit card. But set a reasonable limit of how much you can charge over the holidays, and do your best to stay under the amount. To be on the safe side, only charge as much as you can completely pay off on your January credit card statement.
Find out: 7 Tips for Last-Minute Holiday Shopping
3. Overspending on entertaining
Many people love to throw holiday parties, and even more people love to attend. But if you don’t have a lot of discretionary funds, hosting a holiday party can run up a big bill. Grocery prices have spiked due to the pandemic, so you could easily spend a few hundred dollars on groceries, wine and other alcoholic beverages, or even more on a caterer.
Why not host a holiday party that takes place where someone else is footing the bill? For instance, invite your friends and family to gather at a spectacular holiday light display or make a night of checking out several light displays. Maybe you could all go out to dinner first to celebrate and spare yourself the big bill of a holiday party. Then hit the free holiday events of your choice to revel in the festivities.
4. Signing up for retail credit cards to get a discount
When you plop $500 in merchandise down at the retail store checkout and the cashier says you can save $100 with a 20% discount if you open a store credit card, that sounds like a great deal. And it is a good deal, if you’re a person who never runs a credit card balance, so you don’t have to pay interest. If you won’t be able to pay off the store card’s balance in January, however, you might want to pass on those “savings.”
That’s because the average store-only retail credit card APR is 25.77 percent, compared to the average non-retail card APR of 19.92 percent, according to personal finance site WalletHub. So, if it takes you months (or even years) to pay off holiday purchases charged to a retail card, you could end up canceling out some or all of your point-of-purchase savings by paying high retail card interest rates.
5. Spending money now that you’ll need for end-of-year expenses
Many of us get caught up in the holiday spending frenzy, not giving much thought to the recurring bills we’ll have to pay after the holiday lights have gone dark. For instance, many homeowners face a big property tax bill at the end of December or in the spring. And there’s also the matter of federal and often state income taxes due in April.
Before you go overboard on holiday spending, look up the bills due in the upcoming months. That way, you can budget accordingly so you don’t have to pay a big tax bill on a credit card or drain emergency savings.
Find out: It’s the Most Dangerous Time of the Year
Published by Debt.com, LLC