Can you keep your holiday spending from ruining your debt consolidation plans? If you are in the midst of a debt relief program, your every financial move should be done with caution. You need to be in full control of your spending, especially during the holiday season. It is very easy to splurge when every retail store offers something special for the gift-giving season. When you overspend, there is a possibility that your debt consolidation payments will be compromised. So if you want to avoid making your debt situation worse, you need to make sure you will exert self-control and discipline as you spend during the holidays.
Based on reports, the average 2018 holiday spending was $1,536 for every household. A third of this amount was spent on gifts. The rest of the money was spent on other things like entertainment, outfits, and going out. The last three are not surprising since this is the season of festivities and get-togethers. There will be a lot of events that you need to prepare and spend for.
While we do not want to sound materialistic, the money will play an important role during the holidays. It is harder to make it fun and exciting without enough money.
This is why you need to prepare yourself to spend a lot of money during the holiday season. No matter how much you try to lower your expenses, this will be the most expensive part of the year. The only way you can survive without spending money is to isolate yourself.
Who wants that during the holidays?
Holiday spending tips that will not affect your debt payments
Fortunately for you, there are ways to spend during the holidays without affecting your debt consolidation program. It will take some self-control, discipline, and planning ahead to make this possible.
Here are tips that you can use to keep your holiday spending from compromising your debt payments.
Make a holiday spending list
Start with a list of all the things that you want to spend on during the holidays. These include gifts, decorations, food, outfits, etc. Think back to last year and consider the expenses that you made. It should practically be the same. You can set these as categories and then come up with a different list for each. List all the people you will give gifts to. Make a list of the decorations you will spend and even all the events you plan to go to. These lists will help you track your spending.
Set a budget for each category
After working on the lists, it is time for you to set a budget for each of the categories you indicated. Look at your current budget and determine how much you can afford. Make sure to leave room in your budget for your debt payments and the other basic necessities that you need to spend to survive.
Look at what you spent the previous year and see if you can follow the same budget. Check if your current financial situation can still afford it. If not, then you need to make changes in your list to ensure that the total budget allocation will not exceed what you can afford.
Stick to your budget limit
Once the budget is set, you need to make a commitment to stick to it. There is no problem if you have a bigger budget than last year. But if you have a smaller one, you need to make a couple of changes in your list.
Consider any changes that happened during the year. Maybe you met new people that should be added to your gift-giving list. Or there may be people who walked out of your life and are no longer included in the list.
The same is true for the other categories. If your decorations are still in good condition, you may not have to buy anything new. If you have new clothes that you can accessorize so it looks different – that could mean your clothing budget does not have to be too big. All of these will change your holiday budget for this year.
Know how you will pay for each expense
Finally, you need to focus on the source of your holiday spending fund. Some people admitted to selling some of their possessions to fund their holiday expenses. What about you? How will you finance it? Have you been saving money to pay for your holiday expenses? Or maybe you are expecting to get a bonus? It is important to find the source so you can secure it. If your source will be from a bonus, there is still a chance that it will not push through. Make sure you have a backup plan.
While it is an option for some people, try to avoid using your credit cards to fund your holiday expenses. If you are still in the midst of a debt consolidation program, that means you are still paying off your existing debts. Try not to add to it if you can prepare the funds ahead of time.
What to do if your holiday spending needs your credit cards?
Of course, there are instances when you cannot help but use your credit cards for holiday spending. What will you do?
According to reports, only 4 out of 10 shoppers can say that they will pay for their holiday debt in 3 months or less. For the rest, they said it will take them 5 months or more to completely pay it off. With the high-interest rate of credit cards, it is dangerous to pay it over a long time. The longer it takes to pay it off, the more interest will be added to your balance.
Obviously, the smart thing to do is to avoid using your credit cards for holiday spending. However, if it cannot be avoided, here are some of the things that you need to remember.
Use it as a last resort
Start by exhausting all the other options. Check your savings and make sure you really have nothing to spend. You should also confirm with your employer that there is no bonus. Maybe you can limit what you have to spend so it will fit whatever cash you have at the moment. That way, there is no need to use credit and add to your debt. If you are resourceful enough, you might be able to find a way to meet your holiday expenses without adding debt.
Plan what you will use it for
In case you really have to use your credit cards, make sure you plan how you will use it. Know what expenses will be paid for by the card. If there are items that will help you get rewards points, you can opt to use that. If you can get cash-back rewards, that will help you save money on the expense. Be smart with credit card use so you can minimize the debt that you will accumulate after the holidays.
Be prepared with a repayment plan
It is also important for you to be prepared with a repayment plan. If your boss said that you will get a bonus but it will be given late in the year, you can opt to use your credit cards in the meantime. But once your bonus is released, you have to make sure that it will only be used to pay off your debts. If you get monetary gifts, you might want to use this to pay your debts too.
However, if there are no cash gifts or bonuses to be expected, that is okay. You still have to come up with a repayment plan. Will you consolidate it with your other debts? Or will you try to enroll it in debt management? Unless you know how to pay it off, do not use your credit cards.
Do not forget your other debts
Finally, you need to make sure that you will not forget about the current debts that you have consolidated. You need to continue paying for it – even as you use your credit cards for new purchases. This will keep your total debts manageable. If you want to make things easier, you can come up with a repayment plan that will include all the debts that you owe. Maybe you can opt for another debt consolidation program that you can start when January comes. That way, you can be sure that all your debts are being paid for.