It’s that time of year yet again where most retailers make about 70 percent of their annual earnings. During the same period, the average American will accumulate nearly $1,000 in additional debt. To keep your finances under control this holiday season, we recommend avoiding these common financial mistakes:
Not setting (and sticking to) a budget
Whether you’re spending money on yourself or others, it is crucial to set a budget before you start spending. One of the main reasons people find the holidays so expensive is because they end up overspending. Regardless of the size of your budget, make sure your budget is manageable for you. If you find yourself using up your holiday fund too quickly, it’s best to reassess and determine whether you should and can make updates to your budget. One option is also to consider making returns for any unnecessary purchases, if possible. Use whatever works for you to keep track of your spending, whether that’s an app, spreadsheet or notepad. You can avoid making mistakes like overextending yourself.
Putting everything on credit cards
Many people make the mistake of depending on credit cards to get them through the holiday season. While you may be able to make the minimum payment when the bill is due to avoid penalties, you still need to pay for these purchases at some point. The higher your balance and the longer you take to pay it off, the more interest you will inevitably pay. If you have cash available, it may be best to spend the cash instead of charging your purchase to a credit card to defer payment. You should always try to pay your outstanding credit card bills as soon as possible to avoid racking up debt. Lastly, you want to avoid spreading your purchases over multiple credit cards as this can make spending harder to track and throw off your budget.
Falling for ‘too good to be true’ online deals
Similar to how most retailers and businesses ramp-up their marketing and promotion efforts during the holiday season, the same goes for fraudsters and scammers.
Websites selling products for extremely low, often unbelievable prices pop-up all over the Internet. Be wary of these sites as they generally sell fake or poorly made merchandise. Worse yet, there are sites that will take your payment and not send you any product.
Phishing scams will often use fraudulent links contained within emails or text messages to obtain sensitive such as usernames and passwords or credit card information. To protect yourself from having your information stolen, avoid any links that aren’t familiar. Lastly, always heed your browser’s warning if it tells you a site is unsafe.
Putting yourself (and your finances) last
Don’t get hung up on trying to find the perfect gifts for everyone during the holidays or buying a gift for the hostess for every party you attend. If being financially responsible is important to you, let your friends and family know you won’t be breaking your budget on gifts this year. A heartfelt note and a small token of affection might go further than a fancier and more expensive gift.
For those you do intend on shopping for, one easy way to make sure you stay on budget is to spend the same amount of money on everyone. While gift cards are often frowned upon for their perceived lack of thoughtfulness or effort, they’re the simplest way to keep track of your spending. They’re easy to jazz up with a chocolate bar, holiday card, and ribbon. Chances are, those who receive your gift won’t think badly of your gift giving ability and will simply be grateful you thought of them.
Constantly eating out
From mall food courts to restaurant-based holiday get-togethers or your favorite fast food drive-thru, it’s easy to blow hundreds of dollars eating out over the course of the holidays. Two ways to avoid spending too much on eating out are:
1) Saying no more than yes when it comes to those restaurant and bar invites. You do not have to attend every event.
2) Eating before you leave the house and planning easy to prepare meals for when you get home. Reducing the amount of time you spend shopping can also reduce your chances of working up an appetite when you shop.
By setting a concrete budget and being mindful of your spending this holiday season, you can improve your chances of heading into the new year with a fuller wallet.
MoneyKey – Ultimate Budgeting Guide: https://www.moneykey.com/ultimate-budgeting-guide.php
Investopedia – 7 Most Common Financial Mistakes: http://www.investopedia.com/articles/pf/05/041405.asp
Dave Ramsey – Christmas Mistakes You Might Be Making This Season: https://www.daveramsey.com/blog/5-christmas-mistakes-you-might-be-making-this-season