The best way to spend during the holidays is to save money. While it is a common practice for consumers to acquire holiday debt, it can make the whole experience less appealing. Instead of reminiscing the good memories of the festivities, you have to worry about paying off the debt.
To prolong the good feeling brought about by the holidays, you might want to avoid holiday debt if you can. This is especially true if you are still in the midst of paying off your current debts. You do not want to add to that debt because it would mean you will not be free from debt for a longer time.
According to a survey, households are expecting to spend approximately $1,496 this holiday. That is a lot of money to put on your credit card. It is less likely that you will be able to pay that off when the billing statement comes. This means you will have to pay it all off in installments. That means your balance will increase because of the finance charge. It just made your debt situation worse.
This is why you need to make sure to save money so you can spend it for the holidays. Saving will limit the need to use credit.
Of course, you still have to do something about your existing debts. If you want to pay off your debts while saving money in the process, the best option for you is to use debt consolidation.
Tips to save money for the holidays by consolidating debts
There are three ways to save money while you are paying off your debts through a debt consolidation program. You might want to focus on these so you can hit two birds with one stone.
Get a lower monthly payment
There are many strategies to consolidate debt. If you want to save money on the debt as a whole, you want to pay more each month so you can pay off your debts faster. That will help you save money on the interest rates. However, if you want to save for your holiday budget, you should use a debt consolidation strategy that will allow you to lower your monthly payments.
With your debt payments taking up a smaller portion of your income, you can set aside more money for your holiday spending. It is true that a lower monthly payment will make you pay more in the long run because of the interest. But since the need to spend for the holidays is an urgent need, then you might want to choose a lower payment for now. You can always change it again if it will put you in a better financial position.
Negotiate better terms
When you consolidate your debts, you can do more than just lower the monthly payment. You can also negotiate to have the interest rate lowered. That will minimize the amount that you have to pay on the overall debt. Not only that, but you can also try to waive any fees and charges – like late penalty fees, etc. This is possible but you need to ask first. You will never know until you ask your creditors and lenders.
There is also the option to open a new credit account where you will consolidate all your debts. While you are looking for the perfect credit account to use, make sure it will help you save money. Start with the interest rate. It has to be lower than the average of what you have. It should also waive fees so you have less to pay.
Free up credit cards with rewards or cash-back
This might seem like a surprising tip but it can help you save money. At least, if you do it properly. When you consolidate your credit card debts, you will be transferring the balance into a new account. That will leave your old credit cards with a zero balance. Ideally, you should keep yourself from using these cards while you are still paying off the consolidated debts. However, if you need to spend for the holidays and you are running out of cash, you might want to assign one credit card for your holiday expenses. The rest should be kept and should not be used.
This card that you will assign should have a good rewards program. A cash-back system is also a good idea. If you have one of those cards that can get huge discounts on the stores that you plan on buying from, you can opt to use that. Using credit cards for your holiday spending might put your debt relief efforts in danger. But if you choose the right card and you are cautious with your spending, you can finance what you need without making your financial situation worse. With the right credit card, you might be able to get some of the money spent back.
How to be smart with your holiday spending despite debt
The fact that you are in debt means you need to be very careful with how you spend during the holidays. All efforts should be made to save money so you will not add to the debt that you already owe. However, if that is not possible, that is okay. You can use credit – but make sure it is not done carelessly. When you are happy, it is very easy to overspend.
To keep that from happening, here are some tips that you can follow.
Set a budget and stick to it
Anything is easier to control if you have a plan. When it comes to your finances, that means using a budget to help manage your finances. A budget will help you look at your income and the various expenses that you spend on. To be specific, a holiday budget will help you set a limit on how much you should be spending. It will enumerate where your budget is being spent. If your funds are not enough to cover the expenses, you can decide where to get the money. Or you can decide to cut off some expenses from your list. That way, you will not accumulate debt that you are not prepared to pay for.
Focus on experience
It is also a good idea to focus on experiences instead of paying for material gifts. According to a survey, a lot of respondents said they planned to spend more on experiences for the holidays. These experiences include traveling, eating out or other entertainment activities. While these will get you to spend, there are options that will make you enjoy these for free. The bottom line is you can spend time with loved ones without spending a lot of money. You just have to be creative enough to find the right activity that you will all enjoy.