By Holly Petraeus, Consumer Financial Protection Bureau
Ready or not, the holiday shopping season is here. Whether you’re anxiously waiting for Black Friday, Super Saturday, Cyber Monday or any of the multiple sale days between now and the end of the year, you can avoid being served a heaping side of seasonal debt along with your plate of turkey and stuffing if you keep a few smart saver tips in mind.
Set Reasonable Expectations
In 2012, it was reported that the average American expected to spend $854 on gifts during the holiday season. While many won’t spend that much on shopping, any spending that strains your finances or saddles you with post-holiday debt is bad for your financial future —period. Take the time to talk with family and friends about realistic holiday spending limits before you go shopping. Consider less expensive gift options like homemade gifts. If you have a large extended family, maybe it’s time to start a new tradition of picking one name out of a hat to buy a gift for, rather than everybody buying a gift for every person in the family.
Plan, Budget, and Save
One of the best approaches you can take to holiday shopping is figuring out who’s on your gift list, creating a holiday budget, and gradually setting money aside to help you avoid overspending, unwanted debt, and financial stress. You can find helpful budgeting tools on mymoney.gov. If you didn’t budget and save for this year, it’s never too early to start saving for next year. Check with your bank or credit union to see if they offer holiday savings accounts that you can use to save for next year’s holiday goals. If you set up a plan now and leave that money alone, you’ll have a nice gift fund in a year.
Keep the Big Picture in Mind
It can be easy to forget that we spend money on other things besides gifts during the holidays. Big holiday dinners, travel to see family and friends, and even increased electricity costs to run massive holiday light displays can drain your bank account. Make sure you plan for the cost of all of your extra holiday activities.
Watch Out for Costly Surprises
If you’re using gift cards or layaway plans, make sure you fully understand the terms and conditions. Expiration dates, inactivity rules, and hidden fees on gift cards can eat away at their value if you’re not careful. Take the same cautious approach with store credit cards that you’re offered at checkout. They might save you a few bucks at the register today, but stick you with very high interest rates later.
Avoid Holiday Debt Traps
Doing things like catching early sales, comparison shopping, ordering from sites or stores that offer free shipping, shopping at discount stores, and buying items that offer rebates can help save you money on holiday purchases. However, don’t let the excitement of holiday deals go to your head! If you rush to a store sale because you can get a $3,000 television for $2,000, you’ve still spent $2,000. Was that really something you had planned to do? Also, don’t be enticed by payday lenders who want to “help” you get holiday cash. Proper planning and saving long before the holiday can help you avoid a cycle of high-interest debt that can last for weeks, or even months after the holidays are over.
Keep in mind that holiday spending is short-term spending. Once the unwrapping frenzy is over, how long will the excitement last? Saving your money for long-term goals like home ownership, college or a comfortable retirement may be the very best gift you can give yourself and your loved ones.