Content provided courtesy of USAA.
The holiday season is a time for joy and laughter, spending time with family and friends and sharing our blessings. It can also be a time of overspending, which can leave you feeling haunted by the ghost of Christmas past when the credit card bill comes in January.
If you are like many of us, you may be tempted to spend a little more than you can afford this holiday season. After all, 'tis the season for giving. But before you completely toss your budget out the window, consider:
- National credit card debt was at $669 billion as of mid-2014, up $10 billion in just a few short months.
- 60% of credit card users roll over the debt instead of paying the bill in full each month, and the average balance is more than $10,000.
- Consumer counseling agencies report seeing a 25% increase in the number of people seeking help in January and February, mostly attributable to holiday spending.
Will these factors, along with a slow-growing economy, affect how much you spend this holiday season? The consulting firm PricewaterhouseCoopers predicts that holiday spending per household will fall to $684 this year, down from $735 in 2013. The National Retail Federation, on the other hand, expects spending to increase to about $800 per household, with more online shopping. Fewer than half of those surveyed by the NRF said they would scale back their holiday spending plans due to the economy, down significantly from a year earlier.
Here are some steps you can take to reduce the possibility of buyer's remorse as you shop this holiday season:
Think before you spend. Have at least some idea of what you're looking to buy before you set foot in a store or visit a shopping website. Take advantage of deals when they are available, but be wary of "can't-miss" opportunities. Be sure to shop only with companies you trust, and take measures to protect against the ever-increasing threat of identity theft.
Set spending limits. Put yourself on a budget as a way to reduce the risk of overspending. Then you will be less likely to make impulse purchases you may regret later. You should also set limits for other holiday-related expenses as well, such as food, decorations or travel.
Avoid relying on credit cards and loans to finance your holiday spending. Using a credit card for convenience, added protection and rewards may be perfectly fine, but credit cards work best if you have the money to pay off the balance when the bill comes. Also, avoid the temptation to open up store credit cards. Often, they are a better deal for the store than for you, and they could negatively affect your credit.
It's easy to get caught up in the holiday shopping frenzy, especially when advertisements bombard you from all directions. It may take some willpower to keep your spending within manageable limits, but the payoff is that you will wrap up 2014 in a festive fashion and begin the new year in a stronger financial position.
Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the United States, which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
Financial planning services and financial advice provided by USAA Financial Planning Services Insurance Agency, Inc. (known as USAA Financial Insurance Agency in California, License # 0E36312), a registered investment adviser and insurance agency and its wholly owned subsidiary, USAA Financial Advisors, Inc., a registered broker dealer.