Do you usually end up in credit card debt after the holidays? If so, then make a vow right now that this will be the year you change history. It won't be easy, but you really can get through the holidays without buying stuff you can't afford. How? By following this simple, 7-step plan to a debt-free holiday season.
Step #1: Create a holiday budget
This absolutely has to be your first step. Take a cold, hard look at your finances, and decide how much you can spend this season. Don't think about what the kids have asked for; just look at the amount of money you have available. Write that number down. Every decision you make will be based on this number.
Don't forget to include some of the holiday events that drain your budget while you're not paying attention. Are you hosting Christmas dinner this year? The cost has to come out of your budget. Do you take a bottle of wine as a hostess gift when you go to your neighbor's annual holiday bash? Even if you take cheap wine, deduct it from the budget.
Step #2: Make a gift list
Decide exactly how you'll distribute your budgeted money. How much will you spend on Dad this year? If you have kids, pick the budget for their gifts. This step takes a little time because you'll find you have to try out different amounts for different people until you're happy with what you've allocated to each one.
Now, this is also the time to get creative. Instead of buying a gift, can you have a cookie exchange with your sister? Now, this can get into some sensitive issues because some families don't want to change a thing during the holidays. But if your relatives are open to a less expensive alternative, give it a try.
Step #3: Check your reward points
Do this before you pick out specific gifts for those on your list. If you don't have a rewards credit card, you still might be able to get discounts on merchandise through your card issuer's online shopping portal. Your goal is to make sure you take advantage of your card's rewards to help you stay under budget. If you find that you can get a gift card for your niece to her favorite store, then write down the name of the gift and the amount on your list.
If you've exhausted the possibilities of saving money with rewards, then
decide what item you'll buy for each person. Now, you're ready to research.
Step #4: Research online for best prices
Look at each item on your list and Google it. You'll get an idea of where the best prices are and you might even save money by going ahead and buying the item online. A big advantage to online shopping is that you don't have to worry about resisting the shiny trinkets next to the cash register. The extras you buy on impulse can add up to be real budget busters.
Step #5: Track your expenses
There are a lot of ways to do this without driving yourself crazy. If you use online money management software like Mint, you can check your spending daily to see where you stand. Or simply keep all receipts in an envelope and keep a running total every day. The goal is to know where you stand with your budget. This also allows for a little creative maneuvering. Let's say the gift you decided to buy for your brother had just been put on sale and you saved $20. You can apply that $20 to buy a gift for someone you left off your list. Or better yet, save it.
If you simply can't help it and plan to revolve a balance for a few months, try to use a card with a zero percent APR introductory offer. Or use your credit card with the best rewards. Note this on your list so you don't forget to cash in on it. Don't plan to carry a balance, though, if you're not sure you can pay it off quickly. If you have to revolve for more than a couple of months, you should reduce your holiday budget. Remember, your goal is to be debt-free when the last gift is unwrapped.
Step #6: Don't go crazy at after-holiday sales
You made it this far. Don't blow it now by thinking of how much money you'll "save" on items on sale. If your budget is used up and you don't trust yourself to stop spending, take all of your credit cards out of your wallet until the holiday sales are over.
Step #7: Reward yourself!
You weren't expecting this, were you? We all need a reward for a job well done. If you manage to stay on your budget, you deserve to get yourself a holiday gift. Take the reward points you racked up while buying gifts for others and cash it in on a gift for yourself.
About the Author
Beverly Blair Harzog was a spokeswoman and contributing editor for CardRatings.com. She's a former CPA and an award-winning personal finance journalist. She's a former columnist for the Navy Federal Credit Union's magazine, Home Port, and has written about credit issues for CNNMoney.com, FoxBusiness.com, Good Housekeeping, Bankrate.com, Bottom Line Wealth, CreditCards.com, AARP Bulletin Today, and more. Harzog's also the co-author of The Complete Idiot's Guide to Person-to-Person Lending (Alpha Books/Penguin, April 2009). Follow her on Twitter @beverlyharzog