Entering the holiday season with high-interest debt or financial struggles can put you at risk for a debt hangover that could linger for years.<\/p>\n
It\u2019s a crossroads that many will unfortunately encounter this holiday season. Credit card balances rose to over $1 trillion in the second quarter of 2023, according to a report by the Federal Reserve Bank of New York. The average rate for credit cards assessed interest as of August 2023 was 22.77%, according to data by the Federal Reserve. Compared with previous years, that rate is alarmingly high.<\/p>\n
With interest rates sky-high, this is one of the worst times to charge expenses to credit cards that you can\u2019t pay off quickly. Before you shop for the holidays, consider these ways to help you get clear on your goals and protect your finances.<\/p>\n
Plus: 7 more ways to save that you may not have considered<\/p>\n
If you\u2019re already carrying debt, consider ways to save money on interest. Depending on your credit, some options may include:<\/p>\n
Also\u00a0explore your budget\u00a0for opportunities to save, removing unnecessary expenses and swapping others for less costly alternatives. Then put any savings toward your debt, and contribute enough money each month to pay it down by the desired deadline. Commit to prioritizing your debt over the holiday season and tailor your purchases to facilitate that goal.<\/p>\n
Read:<\/strong> Do you know your credit card\u2019s interest rate? Here\u2019s how much a few percentage points can cost you over time.<\/p>\n Building holiday spending into your year-round budget is a good way to prepare for seasonal expenses. But even if you know how much you have to spend, holiday shopping can overstuff your budget quickly if you\u2019re not careful. One simple but powerful tool can help. Make a list and use the amount you have available to determine how much to spend on gifts, decorations, food, travel and any other holiday purchases.<\/p>\n Every Christmas, Lizbet Barajas, a Texas resident, sticks to a holiday list of expenses to stay on track with her goal to pay down student loan debt. With her husband, she budgets for gifts year-round for two kids, ages 3 and 6, and both sides of their family.<\/p>\n \u201cHaving that list early on makes it easier to know exactly what I\u2019m buying them without having to do last-minute shopping, which then causes you to overspend,\u201d says Barajas, a content creator of the YouTube channel Lizbet Talks Money.<\/p>\n Robyn Goldfarb, a Florida resident and blogger at A Dime Saved, also budgets year-round for Hanukkah to avoid taking on debt. With her husband, she budgets $50 per gift for their three kids, ages 2 to 10, and she only gives gifts on one of the eight nights of Hanukkah.<\/p>\n \u201cOne night we\u2019ll do donuts, one night we\u2019ll do cookies, so there\u2019s something exciting happening every night, but it\u2019s not necessarily a gift or something expensive,\u201d she says.<\/p>\n Also read: <\/strong>9 ways to manage the stress that the holidays put on you and your finances<\/p>\n Consider which expenses are negotiable and which aren\u2019t. If necessary, stretch your dollars by changing expectations with friends and family this year. With prices still high due to inflation, they might welcome a more budget-friendly option, like a potluck, a secret gift exchange, gifts for kids only or a price limit for gifts.<\/p>\n Supplementing\u00a0your income\u00a0over the holiday season can also help you avoid debt for those must-have purchases.<\/p>\n \u201cOne thing people can do is potentially take on a seasonal part-time job or a side hustle,\u201d Block says. \u201cIf you have some unused items or old furniture or things around your house that you aren\u2019t even using, selling that on Facebook Marketplace or Craigslist could be potentially a good way to get a little bit of extra cash for the holiday season.\u201d<\/p>\n Creativity can also lead to savings. It\u2019s how Goldfarb saves on decorations.<\/p>\n \u201cI\u2019ll have my kids make things and I save them from year to year,\u201d Goldfarb says. \u201cThere are so many ideas online.\u201d<\/p>\n Also on MarketWatch:<\/strong> Spending like crazy? Struggling between paydays? Consumers are sending mixed signals ahead of the holidays<\/p>\n Switching your payment method temporarily to debit or cash can protect finances from debt. In previous holiday seasons, Barajas used a version of the\u00a0cash envelope system\u00a0to stay on track. By having an envelope with a fixed amount of money for every categorized holiday expense, like gifts, meals and travel, you can prevent overspending.<\/p>\n \u201cIt\u2019s more visual,\u201d Barajas says.<\/p>\n2. Create a holiday list<\/strong><\/h2>\n
3. Explore money-saving alternatives<\/strong><\/h2>\n
4. Set guardrails to stick to your budget<\/strong><\/h2>\n
5. Look for deals<\/strong><\/h2>\n