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Avoid A Holiday Debt Hangover

No need to remind anyone that the holiday shopping season is upon us and retailers are making impulse buys ever-easier. Since deals are starting early this year, it means more pressure to spend spend spend. Consumers have to be extra-disciplined to avoid money trouble. Seems obvious right? But a lot of people do it the wrong way.

Some credit card issuers have mailed blank checks for their customers to use just in time for holiday shopping, primarily Black Friday. Interest rates on these cash advances can run as high as 20 percent and likely more if you don’t pay off your card within the prescribed period. Opening a new credit card just to get an initial ‘deal’ is generally not the best idea if your focus is to stay out of debt during the holiday season. Getting into any new financial entanglement hoping to get a jump on sales will most likely give you more to fret about come January.

Here are some tips on keeping your spending balanced over the next several weeks:

1. It’s fine to use a credit card, if you must, but use one you already have and limit the spending. That’s right, try using only one card; the one with the lowest rate if you carry a balance. To avoid temptation to pay with others, remove cards with higher rates out of your wallet entirely. Set the goal not to charge a single item unless you can repay in full when the next bill arrives and establish a target date to zero out the balance before you run one up.

2. Make lists. It takes minimal effort and will keep you organized and away from overspending. Make a list of who you’re shopping for, what items you want to buy and the amount you intend to spend on each person. Don’t deviate from the list! Sit down with a cup of coffee and start your shopping online, compare prices and look for deals before you head to the stores. Don’t wait until the last minute to start shopping; it’s a sure prescription to spend more, especially on impulsive purchases.

3. Try layaway but proceed with a bit of caution. Some retailers are offering layaway with no upfront fees, while others will refund the upfront fee, but only in the form of a gift card, after you pay in full. Some are even advertising no cancellation fees. Retailers like Kmart, Sears, Toys R Us and Walmart have lowered or waived fees that shoppers pay to participate in these interest-free, pay-over-time programs. Stores are eager not to lose customers to the competition which means shoppers can get gifts at very reasonable prices while not having to pay an extra fee just to avoid buying with their credit cards. So, if you are considering layaway: read the fine print carefully, make sure the item fits into your budget and make sure you are satisfied with the retailers refun offer if you choose to cancel.

4. Have a financial plan. Sit down with another cup of coffee and write down how many paychecks you will receive prior to the holidays.  Divide your holiday budget by the number of paychecks. Next, set up an automatic transfer from your checking to savings for the budgeted amount. Keep your shopping list on hand and watch sale prices. When you have the money saved and see a good deal for an item on your list, purchase it.  Stay on task, remain true to your list! Don’t get caught up in holiday deals for other items. If you have any savings left after purchasing your gift list, leave it in a savings account or invest it.

So, keep in mind that whether or not you’ve started planning out your holiday spending the retailers definitely have!  They are strategizing how to gain your money, and as much of it as possible. But with careful planning, education and a lot of self-control you won’t be taking months to pay off all the goodies you bought for loved ones. Start planning now to avoid the holiday debt hangover.

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