Holiday debt may be incurred unintentionally, but the consequences can linger long after you put away the twinkly lights and stockings. A 2018 report from Magnify Money showed that consumers polled added an average of $1,230 in holiday credit card debt during that season. Not only did 64% of respondents agree their new holiday debt took them by surprise, but almost half of respondents (49%) said it would take them five months or longer to pay off remaining holiday bills.
If you’re struggling with debt already, the last thing you need this year is a new pile of debt to contend with. Unfortunately, the constant pressure the holidays bring can leave you feeling like you’re set up to fail from the start. Here are the best steps you can take now to avoid a holiday debt hangover.
1. Create a holiday shopping budget
First, you have to have an idea of how much you plan to spend on holiday gifts before you can decide how the funds will be used.
If you started a holiday savings account earlier this year, you may have no trouble logging in to see how much money you have set aside. If not, you’ll need to take a close look at your checking and savings accounts to see how much “extra” money you’ll have to spend this year.
As you assess your finances and excess cash, make sure to think through all your regular bills and expenses that need to be paid each month. Also, jot down any work-related year-end expenses you’ll need to cover, such as holiday travel or holiday parties.
Then consider how many additional paydays you have until the holidays, as well as how those funds will need to be allocated.
2. Figure out how to earn extra money
If you find you don’t have as much extra cash for the holidays as you hoped, you may want to get creative when it comes to finding more cash. This could mean picking up a few extra shifts at work, but it can also mean picking up some work on the side for a few weeks as the holidays approach.
If you’re looking for easy ways to make money before the holidays this year, look for side hustles you can start without a big investment of time or cash. Try walking dogs, babysitting neighborhood kids, or selling stuff you own and don’t use anymore, for example. (See also: How to Turn Your Expertise Into a Side Hustle)
If you have any points leftover on rewards credit cards, you can also see about cashing them in for gift cards or merchandise.
3. Make a holiday shopping list
Once you know how much money you’ll have to spend this year — or at least have a general idea, you need to make a list of people to shop for. While kids and family members will obviously make this year’s list, don’t forget to add in gifts for an employer or your coworkers as well as any holiday gift exchanges you participate in.
Write down this list on paper, or paste it in a spreadsheet along with the amount of cash you have to spend this year. (See also: Take Control of Your Money With These 10 Free Spreadsheet Templates)
4. Make some essential cuts
Next, take a close look at your holiday shopping list to see who needs to be cut. You may find you have family members or friends you don’t need to buy a gift for because you never see them. Or perhaps you have older kids in the family who no longer receive gifts from Santa.
If you participate in holiday gift exchanges and are tired of doing so, those are usually the easiest to cut out. Call the person who normally organizes the exchange each year and let them know you’re on a tight budget. If they don’t like it, that’s too bad.
If you plan to cut family members you normally shop for from your list, it might be wise to let them know ahead of time — especially if they also buy gifts for you or your family. Most people will understand you’re trying to spend less and avoid debt this year if you reach out and explain the situation.
Either way, decide who you want to shop for and remove everyone else from the list. Then you can decide how to divvy up your holiday budget for each person that’s left. Maybe you have two children and allocate $150 to each of them while setting aside $20 per person for other people on your list. Whatever it is, put your budget and plan in writing so you can stick to it.
5. Shop sales to make your money stretch further
Having an idea of how much you plan to spend on family and friends is the best way to avoid going over your budget this holiday season. When you know for a fact you have $20 per person to spend on family members, you’re in a better position to shop for gifts in that price range instead of overspending, or winging it as you go.
While Black Friday and Cyber Monday tend to bring excellent prices and sales on everything from electronics to clothing and home decor, don’t forget to keep an eye out for low prices for anything you want to buy. The internet is your friend when it comes to searching for deals and comparing prices across multiple stores. You can even sign up for the Honey app, which finds the best coupon code and automatically applies it to your cart whenever you shop online.
6. Have a plan to avoid debt when you buy gifts
You may plan to use debit cards for online purchases and cash when you shop in stores this year, and that’s perfectly okay. Just remember that, as a general rule, credit cards are considerably safer when it comes to online purchases due to the way the Fair Credit Reporting Act (FCBA) protects against fraudulent purchases.
If you decide to pay with credit in order to rack up cash back or qualify for consumer protections like extended warranties or purchase protection, make sure you only charge gifts you planned for in your holiday budget ahead of time. Also make sure you pay your credit card bill in full as soon as it arrives. As holiday shoppers from years past willingly admit, it’s far too easy to let year-end bills linger.