In 2015, the average American spent $992 on gifts for the holidays, for a total holiday spending of $630.5 billion. With tight budgets, end of year expenses, and your regular monthly bills, it is easy to go over budget and add debt, during the holidays. While creating a spending plan is the first step, there are also subtle ways you can sabotage your success without realizing it.
The top ways consumers sabotage plans to stay within a budget during the holidays include the following:
Charging Purchases on Multiple Credit Cards
Using credit cards for holiday costs come with both positive and negative consequences. It is a convenient way to make purchases and provides more buyer protections than debit cards. However, when you spend across multiple cards, it is hard to track exactly how much you have charged, which can lead to overspending that you don’t notice until the January bills arrive.
The average credit card has an interest rate of 13.93%, and retail store cards can average 24%. Adding $900 or more to current debt balances, by using credit cards to pay for purchases, could double or triple the actual cost if you rely on minimum payments to pay off the debt.
What to do Instead: Pay with cash or debit cards. If you decide to rely on credit, using only one card can become a tool to track expenses and ensure you remain within your allotted budget. While it is wise to save early for the holidays and pay off credit card charges when the bill arrives, many families are unable to do so. In this case, having a payoff plan that eliminates the debt in the first quarter of the year will save you hundreds of dollars in interest payments.
Applying for Credit Cards at the Checkout Counter
You are at the register, and the employee recommends you apply for the store credit card to save an additional 10% off today’s purchase. With the promise of even more discounts in your inbox, it is tempting to jump on these offers to save money on holiday shopping. Unfortunately, new credit can encourage overspending and make it harder to stay on budget.
What to do instead: If you plan to do a lot of shopping with a specific retailer and have an interest in a credit card, investigate the option before going to the store. You will not lose the first order discount but will have a chance to consider the terms. Tracking purchases with a spending app can help you stay on a budget, especially when you use multiple payment methods.
Buying with Your Heart Not Your Head
The holiday music, an abundance of events, and generous feelings can lead to emotional spending, which can wreck the most well-planned budget. Buying multiple presents for people on your list, and searching for the perfect gift can leave you both frustrated and broke.
What to do Instead: Before you begin buying gifts for loved ones, set a specific dollar amount for each person on your list. Then make it a challenge to spend less than you have allotted without sacrificing the quality of the gift you have in mind. This strategy will have you seeking out sales and discounts for meaningful presents for recipients.
Keep receipts and track store return and price matching policies. If you find a better gift or the same gift at a lower price, swap it out, keeping you within your desired price point.
Relying Too Heavily on Your Phone
Smartphones make it easy to stay in touch and can provide additional discounts and savings by connecting with your favorite store's social media and email promotions. However, these promotions can also entice you to overspend and make purchases, not within your allotted budget or gift list.
Companies rely on social media marketing to target audiences belonging to specific groups, within a geographic radius and based on your search history. Targeted ads will tempt you to buy more items during a time you are actively looking to make purchases.
The other challenge with social media is that friends and associates post their best experiences, which can lead to extraneous spending. Keeping up with the Jones rises to a new level when adding the element of social media.
What to do Instead: Do not allow social media ads and promotions to dictate your shopping list. Instead, create the recipient list first and then match ads or promotions with items within your desired budget.
Over-Reliance on Gift Cards
Making gift cards the go-to present, could increase costs during the holidays. Some gift recipients are hard to buy for, and other times you might rely on gift cards because of procrastination. However, unless you use discount websites such as Card Pool or Gift Card Granny, you pay full price for the gift. At a time when you can find savings on everything from electronics to clothes, your dollar goes further when you buy gifts based on sales, rather than paying full price for a gift card.
What to do Instead: Make a list of multiple items for each recipient and watch for sale items, allowing to buy a meaningful gift without paying full price. Also look for price matching across companies, which can compensate for limited inventory, giving you the item you want for less.
Waiting Until the Last Minute
Last minute shopping does not allow you to take advantage of sales and restricts your buying to specific in-stock items. Inventory tends to run low or sell out of popular gifts. Last minute shopping also limits online purchases due to delivery deadlines.
What to do Instead: Watch sales in November and December and buy items as you find them at a discount. Give yourself time to research potential gift ideas and know the regular price so you will recognize a bargain when it presents itself.
Planning can also leave you enough time to make handcrafted gifts, provide a service, or other creative ideas that do not require buying every item you give.