Top Tips for Staying Out of Debt this Christmas

Avoiding Christmas Debt

Avoiding Christmas Debt

Christmas is often cited as one of the most stressful times of year. This is often due to the financial pressures and intense family pressures around that time.

You will have to juggle family expectations as well as your finances. In addition, some people feel competitive impulses when making spending decisions around christmas. Some people feel compelled to compete with their siblings to have the most expensive and exciting Christmas present.

Here are some great tips to help you avoid Christmas debt.

Sort the Bills First
Use a calendar to plan for the upcoming bills around that period. Sometimes people are so busy shopping and planning parties that bills come as a shock to them, leading to sudden money problems.

Identify the due dates for your regular bills including utilities and food bills. Then establish estimates for bills that occur at Christmas including additional food, traveling expenses, gift allowances and so on. Plan as far ahead as possible to avoid nasty surprises.

Use Cash for Purchases
If you really want to avoid the post-Christmas credit card hangover, simply don’t use it. If making purchases in-store, use cash and only buy what you can immediately afford.

Comparison Shop
Planning ahead really saves you money when it comes to Christmas. Try to get ideas for presents well in advance. Then look for deals on those items in the months coming up to Christmas. Use the Internet to find the best price and see if local stores will price match.

Be Careful with Store Cards
Be careful if using store cards to make Christmas purchases. Often these types of cards have tricky terms and conditions that lead to high penalties or interest rates. Understand that purchases made with this card will be paid back over many months. Take advantage of great offers when you see them, but do your research to avoid being lumped with debt.

Plan to Pay off the Debt by June
Think about how long it will take you to pay off the debt you might incur over the Christmas break. Do some rough calculations and if the debt will take you more than 6 months to pay back (within your normal budget), then you may be spending too much. Your “normal budget” should include saving for retirement and maintaining an emergency fund. So the money you are spending on paying back Christmas debt should come from the “extra” cash within your budget.

Detach Emotions from Purchasing Decisions
When you are buying presents for people you love, it is easy to get carried away. Try to use the analytical part of your brain and make smart purchasing decisions. Think about how quickly you can pay off the purchase, how often they will use the item, what value it will really have for them. If you are buying toys for children who already have dozens of toys, remember they might only play with it for a week. Is paying $100 more for a flashier version of the same toy worth it? Try to be more rational about purchasing decisions and buy presents based on their utility (how much value they add to a person’s life)

Discuss Purchasing Decisions with Your Partner
If you are in a relationship, you might need to discuss purchasing decisions. There is nothing worse than one partner going to the shops and spending vast amounts of money that the couple has to pay back. If one partner is not involved in the purchasing decisions and the purchases are extravagant, it can cause conflict. You don’t want Christmas spoiled by money disputes!

Be Smart About Going Into Debt
If you absolutely must borrow money to buy items at Christmas, be smart about how you borrow. A small personal loan will achieve a much lower rate of interest than a credit card, payday loan or store card. Using a bank overdraft tied to your mortgage also allows you to obtain debt at a very cheap interest rate.

Get the Best Presents With Insight
Often you can get someone a better present by simply thinking about what they really need. You could spend $1000 on a present that will be appreciated but doesn’t suit a person’s life style. Think about their habits, what they do for fun, what will make their life easier. If the person is an avid gardener, buying them a number of unusual plants may be more exciting to them than buying a very expensive vase.

Keep Returns in Mind
Although this is not strictly a money saving tip, it’s a tip that will stop your purchases being wasted. Buy products from shops that have a generous returns policy and know your rights as a consumer. Frequently Christmas presents are not what the person wanted, the gift has a defect or it’s not suitable for the purpose which the person wants to use it.

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