How Do I Stop Overspending During the Holidays?
The holiday season can bring more surprises than a pair of argyle socks or a knitted sweater embroidered with your name - it can also cause the post-holiday blues when you get your credit card statements after the last of the eggnog is gone! Read on for common issues an how to avoid them.
Retailers bombard you with special promotions like 10% off of your total purchase by opening a department store credit card with them. These offers are hard to resist when you want to get your family and friends the perfect gifts, so we understand the temptation to charge, charge, charge. Here are give you a few tips and reminders about how to best manage your credit so you don't once again fall down into a FICO® hole that you need to climb out of.
Tip #1: Keep a budget & track as you spend.
The budget you create for your holiday shopping should come from your disposable income. If you spend more than that amount, you could have a large credit card bill in the new year. Try to figure out your budget before you start shopping — it could save you a lot of heartache down the line.
It's common to go a little overboard during the holidays - those iPhones that everybody wants this year aren't cheap! It's easy to rationalize that this is the "giving time" of year and it's okay to charge a little more than usual. This is only true if you're not "giving" so much that you're unable to pay off your credit cards.
When trying not to overspend during the holidays, it's also probably best to use cash when shopping at stores. Put the money in an envelope and as soon as the envelope is empty, stop shopping. Easier said than done... we know. So, if credit cards are a must, check how much you've spent at the end of each day. Make sure to have a reminder of your maximum budget amount close at hand so you'll know how close you're to reaching your limit.
Tip #2: Don't open new lines of credit for a small savings.
Retailers love to tell you how opening a department store card can save you an extra 10% or 20% on your purchases. We've all done the math at the register when the cashier offers to save you 10%; hmmm, so that's $15 bucks off these $150 leather boots by opening this card - tempting all right.
The bad news is these department store cards typically charge very high interest rates, so if you carry that $150 balance for even one month, you'll be giving that $15 savings back and then some. Not to mention, each time you open one of these new credit accounts might be dinging your FICO Score. As a general rule, don't accept the new credit offers when shopping; that small saving today, most likely isn't worth it in the long run.
Tip #3: The early bird catches the sale.
Start shopping early. Although there are some good sales during the holiday months, there's also a lot of rushing, crowds and pressure you have to contend with. Sales happen all year long, so if possible, start preparing a list in January. This way, if you see a sale item in March that someone on your list might like, you'll be way ahead of the game.
Tip #4: Quality, not quantity.
It's not how much you spend or how many gifts you give someone, it's the thought and how much the recipient will use that gift that really matters. For instance, do you have a relative who wants to eat healthier but doesn't have time to find recipes? Collect healthy dining recipes online and use the printed versions to create a small bounded book at the print service center. It's a lot less expensive (and will probably be used more often) than a fancy vase.
We hope this advice helps you keep a budget and not overspend. There are many more ways to damage your credit during the holidays and the best defense is to know exactly what types of factors your score considers.