Make a List and Check it Twice
One of the easiest ways to limit the chances of going in debt is to plan your purchases.
Did you know that 80% of impulse purchases are made because consumers perceive value when the item is on sale. Why do you think retailers have sales around the holidays? Because research tells them that you are more likely to spend more when the item has a big red sign that shows how much money you will save if you make the purchase. I always have to chuckle to myself when the grocery store cashier tells me how much money I saved and even circles it on my receipt! In case you were wondering, every time you go to the store and spend money you are NOT saving money. Saving money involves 1) not spending money and 2) moving the money to a savings account or investment with the intent not to spend it. Leaving the money in your checking account only to spend it later does not count as saving money as retailers would have you think.
Avoid Stuffing the Stockings
When I was a kid we would wake up Christmas morning and rush downstairs to open our stockings. They were filled with sweets and things like cologne and a small inexpensive toy. What made it special was not the value of the contents of the stocking but the knowledge that my stocking would hold things like a giant candy cane, chocolate coins and an orange that were traditional gifts in my family.
How many times have you participated in a Secret Santa at work and received a gift that you either don't need or already have at home? Why not find that unwanted gift a new home with someone that would appreciate it more? While I would never regift something that a relative or close friend gave to me, I have recycled a few Secret Santa gifts, shhhh don't tell!
Set a Spending Limit and Stick to It
Setting a spending limit is such a simple idea and is a must if you are to avoid going in debt. Budgeting and purchasing inexpensive gifts for coworkers, family and friends during the holidays can save you a small fortune. My family does a grab bag gift exchange for the holidays and we set a spending limit to keep it manageable for everyone. One way to do this is to use last year's holiday spending and set this as your starting point for the following year's budget. In order to make sure you have the cash saved in time for the holiday shopping season, take last year's spending and divide by 11. Why 11 you ask? This will give you the amount you need to set aside in a savings account each month January thru November so that you have the cash on hand come December.
Creating a budget or spending limit is the first step to avoid going in debt. The next step is to keep track of your spending. There are plenty of smartphone apps such as Mint or Xpenser to automatically track your spending for you. No smartphone? Don't let that be an excuse for being in the dark about your spending habits. Paper and pencil work just fine. Keep a log with a running balance and enter each receipt as soon after your purchase as you can. Keep your spending log in your checkbook so you can update it as soon as you make a purchase and don't forget to record purchase made by others in the household.
By planning ahead and making purchases during the off-season when savings are best you can stretch your holiday budget and avoid the need to use credit. The best time to buy holiday season items is right after the holidays when retailers are clearing their inventories to make room for other merchandise. You can save up to 75% by waiting until after the holidays to purchase those Christmas Lights or holiday decorations.