In Debt? 6 Ways to Cut Holiday Spending
It's no fun to go into the holidays when you're already in debt. I remember my long-ago holiday season of credit card debt and how stressful it was. But I got through it without making my debt worse, and you can, too.
Make a vow that you're not going to get deeper into debt this holiday season. It's even possible to come out of the holidays in better financial shape if you stick to a few strategies.
-- Create your holiday spending plan.
-- Use credit card awards to reduce costs.
-- Stick to discount stores online.
-- Get a credit card with a 0% intro APR on purchases.
-- Choose a debt-reduction strategy for the new year.
Create Your Holiday Budget
Be bold and take back the holidays! Just because you've always spent a certain amount every year, that doesn't mean you have to spend the same amount this year. Change things up and focus on experiences rather than extravagant gifts. You might be surprised to encounter relatives who will love this idea.
And if they don't love it? Well, do it anyway. Your goal is to survive the season, not to get into someone's will.
The key to financial survival this year is setting up a holiday budget. Decide how much you can spend overall and how much you can spend on each individual on your gift list.
If you have kids, put their needs first. For the rest, try something radical. For large extended families, suggest a Secret Santa get-together. If you don't have any cash flow for the holidays at all, give the gift of time.
For your mom, bring dinner one night and spend the evening with her. Offer a few hours of babysitting if you have a brother or a sister who has kids and needs to get outside for a long walk.
[Read: Best Low-Interest Credit Cards.]
Another fun thing to try is giving out IOUs. For example, you can create a simple invitation on your computer. You can invite the recipient to an online shoe shopping trip or to accompany you to a nail salon that's following the latest COVID-19 guidelines.
Roll the invitation like a scroll and tie it up with a gold sparkly ribbon (or any color left over from last Christmas). Yes, I've done this before, and it was a big hit.
By the way, this also works if you have something in layaway. You can use this scroll technique to let your kid or spouse know what's coming in February. It's not ideal, but your kid might actually enjoy the anticipation.
And remember, just because you've always had steak and lobster for eight every Christmas Eve, it doesn't mean you have to do that this year. Make this year less expensive and tell the relatives the lobster will be back in 2021. Or maybe 2022, depending on how quickly you can get out of debt.
Use Credit Card Awards to Reduce Costs
Review your rewards accounts for all of your credit cards and pay for your gifts with points. You can redeem them for gift cards or merchandise or use them on Amazon if your credit card is eligible for Amazon's Shop with Points program.
Many credit card issuers offer online shopping portals that give you deep discounts in some popular stores. Or you might be able to redeem points for gift cards, which is often a safe gift for the teens in your life.
If it's an option, consider using your rewards for a statement credit. This way, you'll get the equivalent of a "cash discount" on your holiday purchases. Whatever puts cash back in your wallet is a good thing!
One more tip: If you have a credit card with grocery rewards, use that card to buy gift cards at the grocery store. You'll earn rewards for buying holiday gifts that you can later redeem for a statement credit.
Stick to Discount Stores Online
It's tricky this year with the pandemic, but if you're comfortable going out early in the morning when holiday sales are advertised, you'll get first crack at the merchandise. You also might find unadvertised items that could be a cheaper substitute for something on your list.
But if you aren't comfortable with in-store shopping, there are deals online. I shopped online this year, and I got most of my purchases at 50% off the retail price.
Those of you who have retail or store credit cards will usually have early access to sales. If you're already in debt, be extra careful with these cards. Use the card to get deals, but pay the balance in full when it's due. Retail credit cards often have high annual percentage rates, so it's easy to slip deeper into debt.
[Read: Best Balance Transfer Credit Cards.]
Check Out Drugstores
You'd be surprised by the unique and inexpensive gifts you can find at drugstores. I'll make a confession here. If I have any last-minute shopping, I pop into a neighborhood drugstore.
In recent years, I've scored heated scarves for $6, fuzzy socks for a dollar, denim leggings for around $17, budget-friendly makeup and cute stocking stuffers that were dirt cheap. And one more plus: Since I didn't have to cover a store the size of two football fields, I don't end up exhausted by the end of my shopping trip.
And don't forget to check your credit card rewards programs. Some credit cards offer rewards specifically at drugstores.
Get a Credit Card With a 0% Intro APR on Purchases
If your debt is due to a temporary situation, such as recent unemployment or an illness, and you're actively paying down debt now, then this strategy can help you get through the next few months while you catch up on bills.
A credit card with a 0% introductory APR on purchases allows you to make monthly payments on holiday expenses without paying interest during the intro period. Right now, I'm seeing intro periods ranging from 12 to 18 months, but this is always subject to change.
Warning: This approach requires self-discipline. Your goal is to make it through the holidays and pay this off when your cash flow increases. Use this card only for holiday spending and make on-time monthly payments or you could lose the intro rate.
[Read: Best No-Annual-Fee Credit Cards.]
Choose a Debt-Reduction Strategy for the New Year
If you still have good credit, consider getting a balance transfer credit card with a 0% introductory APR in 2021. You can pay down your debt and pay 0% interest for a period of time.
Due to the pandemic, balance transfer offers have been more difficult to get this past year. But this will likely improve in the new year as the economy gets going again. Start looking for good offers in the first quarter of next year.
If you don't qualify for a balance transfer credit card, look into other options that might reduce your interest rates, such as a debt consolidation loan. If you're really deep in debt, don't wait too long to talk to a credit counselor. You can find one via the National Foundation for Credit Counseling. You don't have to deal with your debt alone.
