Oh, the shopping. The spoiling. The spending. It all seems to consume people from Thanksgiving to Christmas. Heck, statistics show that on December 26th—the day after Christmas—consumerism is just as high, if not higher, than during the pre-holiday season. For many, this spending is done with credit cards, loans, or other forms of money that must be paid back in the New Year. Hopefully, you had a nice Christmas, but if you’re like a third of the population who puts the holidays on credit, you’re likely sipping from the cup of regret by New Year’s Eve, worried about paying off Christmas debt.
In this situation, it isn’t enough to know that you aren’t alone. Even wise, money-conscious people who spend wisely throughout the year can lose their footing when it comes to holiday spending. Suddenly, it doesn’t matter whether something is on sale, if you have to pay shipping, or if it’s something your kids, family members, or friends really need—you buy it anyway. The pressure to make Christmas special and give the best gifts is overwhelming. But here’s the truth: the people who love you don’t want you to go into debt to buy them a pair of boots or a Keurig coffee pot. Most people are simply gifting because it’s Christmas and they feel obligated, not because they want to.
How to Avoid Holiday Debt
Few people have the gumption to say “no” at Christmas. Telling people that you aren’t buying presents or simply opting out isn’t really an option, right? If the kids want the iPad 2, you certainly can’t be the one to disappoint—even though it costs two weeks’ worth of salary. You get the picture. But it’s too late now, and you have to think about how to pay off that debt.
The first piece of advice is to not make the same mistake year after year. Too many people do. If you’re going to be paying for this Christmas until next Christmas, then you’ve made a mistake. Learn from it. Take a vow right now not to repeat it next year. Look around and realize that, in just two weeks, no one really remembers what you bought them over the holidays. This just drives home the point that doing too much is wasteful.
The next step is to set up a Christmas savings account. That way, when the holidays roll around next year, it won’t be so hard. You could set aside $25 a week in a Christmas account and have all the money you need to pay cash by December 25th. Even $10 a week would add up to over $500 by this time next year. Having a budget for next year will help avoid the stress and pressure you feel right now.
Next, make a plan to pay off the debt you have now. First off, pay it off as quickly as possible. Those Black Friday deals won’t seem like such a deal once you factor in the interest on your purchases. If you received any holiday money, put it toward your bills. Try to make a payment every time you get paid so you can get out of debt more quickly. Financial experts recommend that if you’re expecting a tax return or any bulk of money, put it toward your debt instead of sticking it in savings. That way, you can start with a clean slate.
Stop using your credit cards now. Budget your living expenses and stop adding to your debt. If you’ve paid off a portion of your debt, the last thing you want to do is charge it again. Continuing to use credit will only trap you in a never-ending cycle of debt. Cut the cards in half right now, and decide that if you can’t afford something with the money in your bank account, you simply can’t afford it!
You might also want to ask your creditors for a lower interest rate or transfer your balances to reduce the amount of interest you’ll owe. This works especially well if you’re planning to make regular, on-time payments with the new card. It’s a good idea to set up automatic payments on your accounts to avoid falling behind or forgetting to pay, which could break the agreements with lower interest rates.
Consider a debt consolidation loan if you find it difficult to manage multiple debts. However, if you don’t have good credit, you could end up spending more over time. If you choose a debt consolidation loan, make sure you get a fixed interest rate and that the payments are affordable. Try to plan to pay it off within a year—or sooner—so that you can break the holiday spending cycle.
Don’t be afraid to talk to your creditors. One of the biggest mistakes people make is avoiding phone calls or not attempting to make arrangements for their debt. You can’t draw blood from a turnip, but the truth is that you need to negotiate with creditors to get things back on track.
At some point, you have to wonder if all this stress and worry is really worth it. Christmas is just one day of the year, and you shouldn’t still be paying for it months later. If you can’t afford the extravagance of presents, then it’s time to stop spending money on them each and every year. The holidays should be about family, love, peace, and joy. You can’t experience any of those things if you’re constantly worried about paying off Christmas debt.
