6 ways to prevent holiday debt

Because holiday gifts aren’t always a line item in a budget, it’s easy to see why last-minute purchases can end up on a credit card. And while it’s tempting, it’s best if you can avoid doing this at all costs (unless you can pay off the balance in full). Here are six ways to prevent holiday debt — and still celebrate and honor the season.

“If you’re not able to pay your credit card debt off at the end of that month, you’re financing gifts to people,” says Michael Bovee, co-founder of Resolve and a debt relief expert with more than 20 years of experience. “That’s never a good financial move. So only spend what you can afford.” 

And while we know that can be tough advice to follow, we have tips to help you do it without feeling the pinch.

1. Start early to prevent holiday debt

If it’s too late for this year, resolve to make better financial decisions for the holidays next year. How? Start planning from the outset. “Start at the beginning of the year for your holiday spending and have a budget for it that you put money into throughout the year,” Bovee says. “It’s no different than you making those purchases in November and having to pay for them for the next six months. Except all the gifts that you buy then are more expensive after the holidays as soon as the bill comes, because you’re paying interest.” 

Make a list of everyone you anticipate buying a gift for and set a budget of how much you can spend, then sock away the money slowly throughout the year. By making it part of your monthly budget, you’ll be prepared financially by the time the holidays roll around and will be less likely to overspend and get into holiday debt.. 

2. Budget beyond just gifts

Gift-buying is only one part of holiday spending. If you travel for the holidays or host family or friends, you’re looking at bigger expenses for travel, food and potentially accommodations. Account for all of that in your budget when you’re factoring in how much you’ll need to get through the holiday season debt-free. Plus, planning ahead in this category can help you cut travel costs in a big way. Set up flight trackers early if you know you’ll be traveling to visit family or friends for the holidays, so can pounce on cheap flights as soon as you see them.

3. Stay up on sales

If you have your budget and a list of gift items from January, you’ll be in a better position to take advantage of sales long before the holidays. If, say, a gift you want for your sister is deeply discounted during Memorial Day promotions, pull from the money you have earmarked for gifts to buy it for less.

4. Use digital coupons

These days, there are so many ways to get discount codes for online shopping. Whether that’s signing up for a brand’s newsletter, Googling for coupons, or using programs like Honey (a free browser extension that automatically applies coupon codes when you shop on specific sites), make it a rule to always search for a coupon before making any online or in-store purchase. Odds are, you’ll be able to save something, even if that’s simply shipping fees, but we suspect you’ll find deeper discounts if you do a little digging.

5. Keep track of spending

Just say no to holiday debt. Setting a holiday spending budget is only as good as your ability to follow through. It’s one thing to say you’re capping holiday spending at $300 this year, but if you don’t tally up those receipts as you make purchases, you could blow past your self-imposed limit without even noticing. Use a money-tracking app or spreadsheet to make sure you’re staying on target. (Check out Vertex42.com, which has different downloadable budget spreadsheet templates to choose from.) Then stop when you hit either the total number of gifts you need or your upper spending limit. Challenge yourself to come in under budget. And remember: You don’t have to spend every penny budgeted!

6. Finally, for a debt-free holiday, get creative

Separate a good gift from the price tag. There’s no rule that says you have to spend money on someone’s gift. “Can you give your time?” Bovee asks. “I would fall over flat if one of my daughters showed up at my door saying, ‘Dad, I’m here to wash your car. It’s your Christmas gift.’ There are so many ways to give. My wife is a crafter, so at times where we’ve had tighter budgets, she would make a lot of things, and she’s super good at it. Ask yourself: How can I not spend and still give something to someone that is valued by them? People will surprise themselves by what they’re able to create.”

Related article: 6 ways to dig yourself out of holiday debt