Christmas is the time of year where we spend the most money. I say that because we tend to spend our money on things we usually wouldn’t buy during the rest of the year. We have to buy the pretty decorations, the outdoor and Christmas tree lights (if not the tree itself, and of course, the presents.
For all the financial headaches and strain on our time, the Christmas season is indeed a wonderful time of the year, as the song says, but it’s also the easiest time to go into debt. I don’t know what it is about Christmas that makes people overspend, but they do. People will go all out for their kids, which is expected, but if you have a one-year-old child that can barely walk, there’s no need to get him a $300.00 Power Wheels Bentley ride-on car. He won’t be able to start ‘the engine’, turn the wheel, or even reach the pedals!
That’s just one example of the sort of irresponsible spending that people do during Christmas, which causes them to unnecessarily go into debt. When it comes to shopping this holiday season, be smart about it. Try developing some habits that will help you in your finances, not hinder you. Unfortunately, most people tend to go in the opposite direction and indulge in habits that hurt our finances. Take a look at these Christmas shopping habits that do more harm, than good, and take care to avoid them this Christmas season.
Not Tracking Money Spent
Not keeping track of the money you spend isn’t subject only to Christmas time…people do that year round! But let’s say Christmas is the time where it’s done the most. Being that you’re out and about going from store to store to get your friends and loved ones gifts, it can become easy for someone to lose track of how much they spend. That’s why you have to be proactive about it.
Me personally, I’m always logging into my bank account app to see how much I’ve spent. If banking apps are not your thing, or your particular bank doesn’t have a banking app, then you want to hold on tight to your receipts and keep a ledger in your pocket when you’re out shopping.
Just to ensure that you don’t overspend, set yourself a budget before going shopping. Tell yourself, and write down, that you’re only going to spend this amount of money for shopping. As you shop and accumulate receipts, you can deduct the amount you’ve spent from your overall budget for your shopping trip.
Always Using a Credit Card
A credit card is a great way to do SOME of your Christmas shopping, but not all of it. You will quickly find yourself reaching paying interest rates (sometimes high-interest rates) for the multiple purchases you’ve made if you don’t pay off your entire bill at once. When you’re taking the one opportunity you have in the year to splurge on those closest to you, this is an easy trap to fall into.
With credit cards, a good rule of thumb is that whatever amount you spend on your credit card, pay that amount back in full, to avoid interest fees being tacked on to your balance. So, if you see a nice coat that you know your mother would love, and it’s in your price range, go on and grab it, just be sure you can pay that amount back by the time your credit card bill is due. To simplify it, just remember this – only use your card for things you could pay for in cash, on the spot, instead.
Using your credit card too often will also raise your credit card utilization rate. Your credit card utilization rate refers to how much available credit you use in one month of your total limit. It is displayed on your credit report as a percentage. You typically want to keep your credit card utilization rate below 30%. Keeping your utilization rate low shows creditors and lenders that you have experience dealing with credit, and you know how to use it responsibly.
Spending More Than You Can Afford
For this section, I tend to use the phrase “acting your wage.” Sometimes, we get so caught up in the hustle and bustle of Christmas shopping that we forget that there are certain things out there that we can buy, but we certainly can’t afford! You might hear coworkers discussing what they bought their loved ones, and it then gives you the idea of buying the same thing for your loved ones, without giving a second thought to the fact that it could be out of your price range.
One way to remedy this is to fund your Christmas with a loan this year. At least with this route, you still spend the amount you want and need without having to pay it all back at once. Loans give you the funds up front and you pay it back at a monthly fixed rate that you can afford. This will keep you from taking pinches from the utility bill money, and a pinch from the cable bill money, and give you an option to make all of your Christmas purchases responsibly.
Not Shopping for the Best Deals
Besides Black Friday, Christmas is the time of year that you’re most likely to find the best deals on the best items! You’re almost giving yourself the short end of the stick if you don’t look for savings when you shop!
As good as those deals and steals sound, there are people out there who don’t take advantage of those savings. The key to Black Friday and Christmas shopping is that you need to properly prepare for it. In order to catch the deals, you have to get to the stores pretty early in the morning. There’s also Black Friday online deals as well, but lots of people enjoy getting in the hustle and bustle of actually shopping in the stores. Some stores open up as early as 4 a.m., so if you’re not a morning person, then the early store hours could turn you away from the deals; but for those who are morning people, then Black Friday will be like paradise to you… some stores even open up on Thanksgiving night!
When it comes to Christmas shopping, and catching all the deals, just keep in mind that Black Friday is only once a year. It may be cold and frigid, but you can sacrifice your sleep one time for the sanctity of your wallet. Going into debt over Christmas gifts and decorations is definitely not how you want to go into the new year.