What to do when you actually love giving holiday gifts, but you hate the idea of racking up credit card debt?
Can buying holiday gifts and staying out of debt actually coexist?
I have a huge family – more than a dozen, and growing even larger as my sibs get married. Believe it or not, I love the whole gift giving exchange at holidays. It’s so much fun to hunt for something special for each loved one; something they will enjoy or use to personalize their home or workspace.
But I also love not racking up credit card debt. So I created a holiday spending plan for myself: I spread out my spending, and start buying gifts as early as October each year. Other times, I might start buying even earlier in the year if I happen to see just the perfect gift for someone.
What about you? I did a little research and found that at least 52% of holiday shoppers finance their purchases – at least in part – with a credit card, according reports*. The good thing is that most people pay everything off by the end of February, but some are paying off this debt over a year later! We hope that’s not you. If you have gotten yourself into holiday debt this year, try these ideas:
· Stop or minimize additional credit card charges. While you’re paying off your holiday debt, don’t use your credit card for even more purchases after the holidays. Enough already! Instead, buy only the bare minimum (see my next step) and use cash whenever possible until you have a zero balance.
· Stick to a tighter budget. You can do this. If you’ve splurged on the holidays, then cut back on your everyday spending now until you’ve paid off your card. Buy only necessities. When you think about it, this isn’t hard. You probably have way more of everything than you’ll ever need, so slow down and just buy the basics: food, housing and utilities, medicine, transportation and other absolutes.
· Get creative with opportunities for additional income. Some people consider a side job, but another good option is to simplify your house and get rid of what you don’t use. Then list these things for sale on eBay or Craigslist. Or if you’re creative, try selling your works of art on Etsy, and so on. Think outside the box.
· Pay down your balance as much as possible. Rule number one is to not ever have a credit card balance. But just in case you do, then apply all of your extra money to paying this off. Otherwise, that cute cashmere scarf you bought for your sister that cost you $85, will cost you an extra $7 in interest over a year. Or how about the $300 gift you bought for your brother and his new wife? With interest of 14.9% over a year, it’ll cost you $330. Now, think about the cost if you put a big chunk of your holiday shopping on the credit card, say, $2000… Over a year, that’s over $200 in interest! You can also consider filing your federal income taxes early (as soon as you receive your w2 from your employer), and use the funds from your return to pay down your credit cards.
· Carry only one credit card. There is no reason to own more than one credit card unless you plan to go into huge debt, or unless you use one for personal and one for business. So do everything you can to pay off your multiple cards quickly, and then keep only one card. The card you keep should not have a yearly fee, and should give you either airline miles if you travel, or merchandise credits. If you want some inspiration on how to get out of credit card debt quickly, read Janet Luhrs’s The Simple Living Guide. It’s full of real-life profiles of people who have paid off their debt using incredible creativity. Or watch out for her upcoming class on one of the fastest paths to freedom – achieving financial independence.
· Look into other options. Consider a balance transfer to a credit card with a lower apr (and additional offer caveats, such as 0% apr for several months). If you can be diligent and pay your card off during the 0% card’s grace period, then you’ll be way ahead. Before you do the balance transfer though, do your research to make sure there are no hidden fees or contracts.
· Plan for next year. Start now to prepare for the 2016 holiday season, so you don’t find yourself in the same spot next year. Some ideas include shopping throughout the year, doing a family gift exchange to reduce the amount and expense of gifts, and finding creative ways to earn more money.
How do you plan to pay off your holiday gift spending on credit cards? I’d love to hear more about it, share below or on the Simple Living Facebook page!