Plan Your Debt – BEFORE the Holidays

It’s not uncommon to take on some holiday debt. In fact, last year, 35% of Americans took on holiday debt, with an average of $1,549. However, this average was up 24% from 2021 and is the highest average ever measured by LendingTree’s survey.

With the increase of prices and interest rates, it’s more important than ever to keep an eye on debt. Consider these tips while you’re going into the holiday season.

Create or adjust your budget.

It’s important to keep in mind that inflation is up, so what you budgeted last year may not get you the same gifts this year. Consider your shopping list early and make a realistic budget for everyone you’ll be buying for. If you’re traveling, make sure to include this in your holiday budget too. If you need to use your credit card or take out a loan, you can get a head start on that debt by planning those repayments now for the future months.

Shop Black Friday wisely.

Determine how much you’ll spend before the deals begin. While creating your budget, start to map out what you’ll be buying for everyone on your list. Try picking a couple of ideas per person and then watch if one of the items goes on sale to make your gift choice. Having a plan going into Black Friday will help too, as you can reduce what you spend by only buying what you decided on prior to shopping.

Resist the urge to impulse-buy. Stop looking at deals once you’ve hit your budget or gotten what’s on your list. You’re not saving money if you’re spending money on things that you don’t need – even if it’s a great deal!

Get a low rate.

If you’re expecting to use a loan or credit card to cover holiday expenses, be wise about it. Look for a low rate when you’re taking on debt, like our Anything Loan and our credit cards that also have no annual, balance transfer or cash advances fees. If you already have multiple debts, consider using this as an opportunity to consolidate to a lower rate. Be smart about borrowing!

Plan your payoff.

When it comes time to pay back any money you’ve borrowed, make a plan. If you feel overwhelmed by a lot of different debt sources, consider one of two strategies: the snowball method and the avalanche method.

The snowball method helps you feel accomplished by paying off credit cards or loans with the smallest amounts and working your way up to largest amount. The avalanche method starts by paying off the loan or credit card with the highest interest and working your way down, so that you pay the least amount of interest total. Either way, you should still be making minimum payments on all your debt to avoid incurring fees or tanking your credit score.

Remember, if you’re already in debt without a payoff plan in place, make sure you include that and focus on your existing debt before taking more on.

Keep funds on hand for emergencies.

Don’t forget that unexpected expenses can still come up during the holiday season, especially with all the travel and adverse weather. Always have a back-up plan for emergency expenses, should they arise. Don’t get caught in debt from both holiday gifts and an emergency! Keeping a reserve on hand can help prevent you from taking on too much debt at once.

Save ahead. Starting to think about next year and open a Holiday Savings Club account to prepare for the holiday season of 2024. You can save all year and then withdraw on November 1 for your holiday shopping and travel. Learn more here.

Sources:

lendingtree.com/credit-cards/study/holiday-debt

Other Links:

https://www.hondafcu.org/loans-and-credit-cards/anything-loans

https://www.hondafcu.org/loans-and-credit-cards/credit-cards

https://www.hondafcu.org/checking-savings/savings-accounts