In a few weeks, the worst time of the year for your wallet is going to begin. We’re going to highlight 6 ways to have holiday debt.
I always make the analogy that a Christmas budget is like a wedding budget. All inhibitions go out the door and budgets are broken because of the Christmas spirit. It is estimated over 33% of Americans will spend at least $1000 on gifts this year. Most people plan to fund these purchases with credit cards and loans.
Americans go out of their way to build debt in order to satisfy…the Christmas spirit? Don’t believe me?
If you look at historical credit score data, FICO scores always take a dip around January. This is from – you guessed it – all the debt built up during the holidays finally hitting their billing statement. As a matter of fact, people declare bankruptcy most often in the month of March. The time period when people can’t pay for their bills anymore.
Our mantra here at Why You’re Broke is the best way to stay out of debt is not get more debt. Such a simple concept, yet – so hard to follow. So we’ve decided to switch it up. The best way to get into the debt is doing these X things.
1. Forgetting that the reason for the season is consumerism
Let’s play a game, I start a phrase, you finish
it with the first thing that comes to your mind. Ready? The reason for the
Okay, most of you probably didn’t come up with that word, yet that’s what everyone does and enjoys. Think about it, the last time a commercial you saw a commercial of the Playstation 360 Switch, it showed a fat, stupid, obese child idly playing with their jaws hanging. They don’t. Yet as parents, we are convinced our children will be happy if they get a Playstation 360 Switch.
Be aware that the holiday season encourages consumerism and has marketing designed to convince you that you need something you don’t. It certainly makes it a lot more easier when you’re shopping for gifts to not also shop for yourself.
Instead, of think of what matters to you and focus on that. For Mr. and Mrs. Broke, we love spending time with our family. We still get gifts, but we do not get anything over $50 for our family.
Think of it like this – you probably don’t remember when you were 10…or 25. You probably do remember spending to time with your family, because that is what is important.
2. Don’t budget the amount of money you will spend
The best way to build debt? Never budgeting
anything. A lot of people go into the holidays with this mentality.
So how should you go about budgeting? Review how much money you spent last year and determine how much you spent. Make a note of the number, don’t write it in permanent ink yet– this isn’t your budget.
Review where you spent on and where you could have spent less. I’m a big believer in getting a gift of less than $50 for your loved ones. If you spend more than that last year, cut it down to $50.
Based on that amount determine where you overspent or how the gifts are going to be different this year compared to last year. Then, tally everyone’s gift and this is what your budget will likely be.
3. Don’t make cuts to your budget
This point kind of dovetails off the last point.
Growing up, I always received one gift from my parents. Imagine my shock when I first learned that it was common practice to receive more than 1 gift from your parents.
Trust me, your children and loved ones will not love you any less if you don’t get a $100 gift. If they do, disowning them may be a great fit option as well.
4. Don’t put aside money into envelopes or savings accounts
Budgeting is easy. Anyone can do it. The hard
part is having the mental muscle to do it.
As you get better with money, you will be able to
build the mental muscle to stick to your budget. In the meantime, you need to
put processes in place to save your money and prevent yourself from spending
Create a separate bank account or using the
envelope methods are both very successful methods for a lot of people. The
purpose is to forget about the money that you are putting away so you rarely
see it unless it’s to actually use it.
5. Spend all your money on Black Friday and Cyber Monday
Similarly, Cyber Monday, Super Saturday, Sale Sunday, and Deal Tuesday are days that sound jivy but rarely have anything much cheaper than any other part of the year. As a matter of fact, studies show that the closer you are to Christmas, the deeper the sales.
Also, kudos to people who realized that I made up Sale Sunday and Deal Tuesday.
Rather, you should approach Black Friday (and the following days) and look for significantly cheaper items than you would buy any other time. Whatever you do, do not spend more than 75% of your holiday budget on Black Friday. If you have, you’ve approached the Christmas season all wrong.
6. Don’t wait until the week before Christmas to buy items
There is always a saying that if you always
do things last minute, you only take a minute to do it. You’re only being
Similarly, buying Christmas gifts should be
approached in the same way.
The best sales are going to be toward the end of the holiday season when the retailer is trying to sell off their items. Additionally, with recession fears in full swing, it is anticipated that people will not be buying as much stuff as they usually do.
About the author: Matt listened to financial experts for years, but never quite had the same success that was promised. He realized the difference between the experts and most Americans is most of us don’t come from money. Instead, he had to learn the hard way to stay out of debt and not live paycheck to paycheck. Why You’re Broke was started because it gives a platform for financial solutions for the working people. Striving for financial stability is a minimum, a greater financial future for everyone is what Matt strives for. You can email him at firstname.lastname@example.org.