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Create a budget to avoid holiday and credit card debt this year

The months leading up to the holidays can be a busy time for both schedules and credit cards. Instead of simply cringing at credit card bills in January, this advice should provide consumers with a way to prep their finances—before the holidays even begin—to avoid holiday debt.


Do check your credit report

With free credit reports available, it’s important to see where you stand before spending planned and unplanned amounts during the holidays. Being proactive can also help you spot mistakes on the report or if you have been a victim of identity theft.

Do try to resolve any unpaid bills

While it may be difficult to start your holiday shopping with a completely clean financial slate, try to pay off as many bills as you can prior to the holidays to keep from increasing debt and interest rates that can affect you long after the holidays are over.

Do begin saving with the holidays in mind

If you can begin saving a few months before the holidays, you have a better chance of staying within your budget and maintaining a neutral or positive credit score. Stash some money away in a shoebox or open up another savings account specifically for the holidays, birthdays, or other special events. With fixed dates that you know will require extra spending, it’s easy to prepare for them by saving money for these times.

Do review your holiday spending from last year

Review what you spent last year to determine what might be a feasible amount for the coming year. This will help you to decide whether you can afford the same amount, need to cut back, or have some flexibility. Remember that you never have to outdo your gift-giving or party-throwing from the year prior.

Do create a realistic budget

Once you have reviewed your current credit score, last year’s spending, paid any lingering bills, and saved some money for holiday spending, you should create a realistic budget for your holiday shopping. Budgeting can provide some guideposts for how to spend the money you have available for your holiday spending and determine what you’re willing to carry over into the new year. Budgeting will help you preserve your credit worthiness going forward.


Do not avoid opening retail credit cards just for the savings

While the savings they are offering may seem like a good idea at the time, opening multiple credit cards diminishes your credit score and will be more of a hassle in the future when you’re trying to improve your score.

Do not fall for big sales

Most shops have big, flashy sales during the holidays. More often than not, they're not really sales at all. Be careful not to fall for those “Buy 2, Get 1 Half Off” deals that only mean you end up purchasing more than necessary. Remember: stick to your list and to your budget.

Do not go overboard

Keep in mind that when you use credit, you’re borrowing from your future income. You know your finances better than anyone. Only charge what you can afford, and you’ll avoid paying on your holiday debt until the next holiday season.

Do not panic if you overspend

If you overspend on one person, or on one particular gift, don’t panic. Just be sure that you scale back your spending in other areas to make up for it. The only way you’ll be able to catch this and adjust for it is if you budget for it in the first place.

Do not put everything on your credit card

While it's tempting to overspend during the holidays and just charge your credit card when you run out of cash, you could end up starting the New Year in debt. However, if you can realistically pay off the charge amounts before the end of the billing cycle, use a rewards credit card to earn some money from your holiday spending spree.

As long as that balance ends up being paid in full before the billing cycle ends, you can enjoy a modest discount on those holiday purchases—and stay under budget. 

Jumping cartoon

By taking care of as much pre-holiday debt as you can, thoroughly preparing a budget and sticking to these holiday-spending Dos and Don’ts, you will be able to afford this extra holiday spending. Maintaining positive credit card use and keeping yourself from going into unmanageable debt will help you enjoy the holidays even more after you’ve finished your shopping.

More expert advice about Credit and Debt Management

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John C. HeathDirecting Attorney

John Heath was born and raised in Salt Lake City, Utah. He received his BA from the University of Utah and his Juris Doctor from Ohio Northern University. Mr. Heath has worked as an attorney in both a private and public interest practices. He...

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