This week, I have been providing comments about minimizing the stress that comes with holiday spending. What I have to say is pretty straightforward. It comes down to making a plan and sticking to it.
No discussion about money and holiday spending would be complete without mention of credit cards. In the past, I have referred to credit cards as “evil.” That is a bit of an exaggeration. Credit cards can be very useful for making purchases when you are a little short of cash. They are also very useful for making online purchases and booking flights, hotels, car reservations, etc.
The key is having a plan for paying off credit card purchases. There’s that p-word again. If you pay your credit card balance in full each month, there are no interest charges. None. The trouble, of course, is when you carry a balance from month to month and start to incur interest charges.
Take a look at your latest credit card statement. Many now show how long it will take to pay off the balance if you just make the minimum payment. I’ve met with people where the repayment period is more than 25 years. And that’s assuming that you don’t make any more purchases with that card.
Stop and think about that. If you have been making only the minimum payments, a portion of that payment could be going toward Christmas purchases from more than a decade ago. Yes, we want to give nice gifts to our loved ones. Yes, we want to see our children light up with joy Christmas morning.
My point is that it is important to understand the full cost. When you are setting your budget for holiday spending, don’t plan on using credit. You should focus strictly on cash flow and the savings that you have. For next year, you could set aside a small amount each month in a different bank account. That way, it doesn’t feel like too much all at once.
Tomorrow, we focus on bargain hunting.
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