You know the holidays as “the season of giving,” but you might as well call it “the season of spending,” too.
This year, the National Retail Federation forecasts that “the average person celebrating Christmas, Kwanzaa and/or Hanukkah will spend $804.42” on gifts. For many of us, this is a major burden to bear at this time of year. How do you find room in your budget to tack on another $800 in December?
And there are other expenses, too. If you’re flying, brace yourself for some of the highest airfares of the year.
For many, these expenses and others can lead to holiday debt, especially if you’re buying with credit cards.
If you’re facing this kind of holiday debt, here are some ways to avoid it this season.
1. Set your budget and save in advance
Don’t pretend that you won’t need extra money to buy gifts. Instead, prepare yourself for of the holiday season by setting a budget and putting savings aside.
Before you start shopping, set a budget for each person on your list. You can do this with a holiday shopping app we’ve recommended called Santa’s Bag. Simply add people from your contacts and set a budget for each. This will allow you to add up the grand total of what you need ahead of time, as well as to check people off your list as you buy for them.
Before the next holiday season, set aside the money that you know you’ll need to spend. An easy way to do this is to take your holiday spending from last year and divide it by 12. Then, transfer that amount of money each month into a separate holiday savings account. You can even place that money into a special “Christmas Club” account that’s designed specifically for this purpose. That way, when the holiday season rolls around, you’ll be ready.
2. Pay bills early to avoid a holiday debt pileup
One of my favorite tricks for avoiding credit card debt is to pay bills more frequently and before they’re due.
One of my biggest challenges is reconciling bills to be paid with my bank account balances. The best solution for this is keeping a budget.
However, you and I both know that keeping a budget is easier said than done. It’s easy to feel as if you have extra money in your bank account. Yet, if I fail to balance extra money out with outstanding bills, then I might get an inaccurate picture of what I have.
Paying more frequently, such as every week or two, means that you’ll keep balances down and avoid the feeling that you have extra money waiting in your bank account.
This strategy works for paying other bills, too. In case you haven’t adequately saved for the holidays, paying off bills early means avoiding debt later by not spending money that you don’t have.
In my case, taking that money out of my bank account helps me to avoid overspending.
3. If you have holiday debt, pay it off early in 2015
We all get gifts that we don’t need or won’t use. Instead of letting them gather dust, simply get rid of them.
Try returning them first. If you have a receipt, then you can use returnGuru to make returning gifts easier. Scan your receipt into the app for safekeeping until you’re ready to make the return. The app even lets you know what the store’s return policies are and reminds you when you’re nearing the deadline to make your return.
For what you can’t return, there’s eBay. According to eBay, every year users sell more than 100,000 unwanted holiday gifts. It’s such a popular option that eBay even has a guide for selling unwanted holiday items.
Don’t forget that you can also sell older things that were replaced by holiday gifts, such as laptops or smartphones. You may be surprised to see how much these items sell for, even if they’re a few years old. For example, a used iPhone 5S could be worth $300 or more, depending on its condition. Even your old iPod could be worth as much as $90,000!
Your tax refund is another great option for repaying any debt that you owe. Every year, millions of Americans receive thousands of dollars back from the IRS. The average tax refund issued in 2014 (for the 2013 tax year) was $2,651.
Yet, many forget that these refunds aren’t free money. It’s actually your hard-earned income that you’ve overpaid to the government.
From another angle, the average refund last year was about three times the average holiday gift-giving expense. This means that you should easily be able to take a portion of your refund to pay off all of your bills, as well as start saving for next year’s holiday season.
If you’re diligent about doing your taxes, then you can likely get your tax refund back as soon as February.
4. Find the cheapest days to fly
If you’ve ever flown during the holidays, then you know how expensive flights can be. But there are a few tricks for keeping costs down.
Your best bet may be to pick the right days to fly. CheapAir tracks the best days to fly during holiday seasons. For the 2014 holiday season, they have a few tips:
- Leave on December 23 and return on December 30 if you’re traveling for a full week. This is likely your cheapest option.
- Avoid flying on January 4. It’s likely going to be the priciest day to fly this season.
- Flying on Christmas or New Year’s Day can potentially mean getting great deals.
In terms of when to book, CheapAir suggests starting to look for tickets earlier than you usually would. Though looking for flights 54 days in advance was the best option for most circumstances, booking 5 months in advance offered the best deals for the holidays.
Pay all your bills from just one app.