How to avoid holiday debt this year without skipping the holidays

The holidays come around every year, and they still catch a lot of budgets off guard. That isn’t a willpower problem. It’s a big expense that lands all at once. If you plan for it now, it turns into a normal bill instead of a January surprise.

Start with one number

Before you buy anything, decide what the whole season can cost. Write down everything it usually includes:

• Gifts, person by person.
• Travel, including gas or flights to see family.
• Food and hosting, plus the extra groceries.
• Work parties and the little things, like wrapping paper.

Add it up and leave a small buffer for the thing you forgot. That’s your holiday total. The goal is a number you can pay in cash, or pay off in full on the first statement.

Turn it into a weekly number

Divide your total by the weeks you have left. Then move that amount into a separate savings account each payday, so it’s sitting there when you shop.

What it costs if it goes on a card

Putting the holidays on a card isn’t the end of the world. It just costs more than the price tag, and it can take a long time to clear if you only pay a little each month.

Ways to spend less that don’t feel like less

• Suggest a gift exchange. One name each, with a price cap, instead of a gift for everyone.
• Set a per-person number before you shop, and write it next to each name.
• Say it early. Something like “I’m keeping gifts small this year, and I’d love to do something together instead.” Chances are someone else was hoping for the same thing.
• Shop from a list. Browsing is where the extra stuff sneaks in.
• Make checkout a little slower. Remove your saved card from shopping sites for the season, and pause store emails for a month.

Be careful with pay later deals

Buy now, pay later splits a purchase into smaller payments. Each one is still a bill, and it’s easy to end up with several at once. Before you use it, add every payment to your calendar and to your holiday total.

Store card offers that say “no interest if paid in full” work differently from a true 0% rate. If you don’t pay the whole balance by the end of the promo, you can be charged interest going back to the day you bought it (CFPB). Look for the word “if” in the offer.

If you’re already paying off debt

Keep your regular payment going in December. Skipping a month for gifts moves your debt-free date, and new charges on top of old ones move it more. If you can only do one thing, protect that payment.

If you do end up with holiday charges, add them to your plan right away. Send any extra to the card with the highest APR first. That’s the avalanche method, and it saves the most interest. (More in avalanche vs snowball.)

For a quick check, run the free Haluvra debt payoff calculator with and without the holiday charges and see how far your date moves. In Glow Up, What if planning does this with your own cards, so you can see a holiday month before it happens.

Or try the free debt payoff calculator

Keep reading

• How to make a budget when no one ever taught you
• Why your minimum payment feels like it does nothing