SEP 05, 2011
Did your plastic smoke for months after last yearâ€™s holiday shopping season was over? If you use credit cards to fund your holiday gift-giving, you could easily find yourself with a really unwelcome gift come January â€“ credit card debt.
Spreading the cost of holiday shopping over several months isnâ€™t necessarily a bad idea. But itâ€™s a lot easier, takes less time and can be better for your credit if you fund your purchases by saving money for holiday shopping in advance, rather than by using a credit card and paying in arrears at double-digit interest rates.
Fortunately, if you start now, you have plenty of time to save up for the holidays and keep holiday spending in check. Here are some ideas that can help:
Make a List
Santaâ€™s been making his list and checking it twice since last Dec. 26, and you should have a list (along with spending limits), too. Thinking about what youâ€™ll buy now not only helps relieve last-minute stress-shopping (which can be costly), it will help you know how much you need to budget to take care of everyone on your list.
Create an Account
Maybe you remember your parents or grandparents talking about Christmas Clubs when you were a kid. Simply put, those are special savings accounts where you set aside money each month. When holiday shopping season arrives, you get that money back, plus a bit of interest. Why not just save in your regular checking or savings account, you ask? Separating out the money may make you less likely to dip into it for other purposes, whereas having it in a general account may tempt you to spend your holiday savings on other things before the season arrives.
Trim Your Spending
To save money, you have to spend a bit less. So take stock of the â€œwantsâ€ that you spend on every month and decide which of them you can live without between now and Black Friday. Replacing your daily Starbucks with a cup of joe made at home â€“ even if itâ€™s from a pricey gourmet bean â€“ can save you a bundle, and that money can go directly into your holiday savings account.
Check it Twice
Itâ€™s possible thereâ€™s someone on your list who deserves a really great gift, a big-ticket item that would eat up your entire holiday savings if you paid for it with cash. So is it okay to use credit just this once? Check your credit report and score to get a better idea of your current credit status. If buying that item wonâ€™t max out your credit card, and you have a definite plan in place for paying off the balance quickly, then it could be a good use of credit to buy a really special gift for that really deserving loved one.