Holiday debt can quickly haunt a new year. According to Gallup, $830 is the average amount each American adult is expected to spend on Christmas gifts in 2016. Interviews also found that 30% of Americans are expected to spend over $1,000 on gifts. When you add in the additional spending on decorations, parties, greeting cards, baby sitters, travel, and holiday apparel purchases, credit card debt increased by an average of $983 for holiday spending in 2015.
How can you get a handle on holiday spending and debt? The simple solution is to set up a budget and stick to it. A budget will help you track your expenses and help you resist the temptation to splurge. Budgets also help you anticipate and save for future expenditures.
It’s probably too late to budget for Christmas 2016, but it’s not too late to devise a plan to pay off the 2016 Christmas debt and save for Christmas 2017.
There are two “debt payoff” strategies suggested by Dave Ramsey in his financial strategies course known as Financial Peace University. Dave calls these debt pay off strategies Debt Snowball and Debt Avalanche.
Let’s think ahead to Christmas 2017. You still need to have a budget and a plan to pay for those bills. Using your 2016 Christmas list, figure out how much you will likely spend in 2017 and divide by the likely amount of months you can save. (That all depends on how quickly you pay down your existing debt.)
Here are some other ideas about holiday shopping to consider:
When your debt load becomes overwhelming, you may need professionals to help you. Call the local non-profit consumer credit counseling service. If there are none in your area, you can go to www.nfcc.org to find counseling assistance. They’ll work with you to create a budget to get your debt under control.
CFP®, FLMI, Annuity Product Manager
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