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The holiday season is upon us! Avoid putting yourself in debt this holiday season by getting organized and developing a budget. Here are 5 tips for holiday shopping that will keep you within a budget.
Make A List
It’s always a good idea to create your shopping list ahead of time. Write down who you are shopping for, what your budget will allow per person, and what you expect to buy. Having an idea of what you’re looking for prevents impulse buying, and it’s a major time saver. Plus, you don’t want to forget to buy a present for little Timmy, whether he’s been naughty or nice this year.
Develop a Budget
Take a look at your bank account and determine a realistic budget for yourself. Once you have decided what you can afford to spend this holiday season, stick to your budget! If you plan to spend $20 on a gift, only spend $20. It’s easy to say, “What’s one of two more dollars?” But if you spend a few more dollars on each person that money adds up and your budget has completely gone out the window.
Shop With Debit Cards/Cash Instead of Credit Cards
Leave your credit cards at home and use cash or debit cards. With a credit card it’s easy to just swipe now and worry about how to pay later. Inevitably you’ll spend more than you intended and will be blindsided at the end of the month. Using cash or debit cards forces you to be aware of how much you have left in your account and will help you stick to your budget. Plus, you will avoid paying interest on your credit card bill. The National Retail Federation predicts that the average American will spend $805 this holiday season. If you charged all $805 to your credit card and only paid the $25 minimum monthly payment with an average annual percentage rate (APR) of 18% it would take you 45 months to payoff. Over the course of those months, you would end up paying $1,107.70 instead of $805, meaning you paid an unnecessary $302.70 in interest. Definitely not worth it.
Try to get your holiday shopping done as early as possible. Not only will you beat the chaos of the holiday rush but the extra time will allow you to shop wisely. By giving yourself plenty of time to shop you get the luxury to compare prices and find deals on what you’re looking for. Last minute shoppers are left with no choice but to buy regardless of the price. Plan ahead so you don’t run out of time or money!
Beware of “Deals” and “Sales”
Retailers are excellent at enticing shoppers and painting the picture of a “great deal.” While Black Friday and Cyber Monday sales may seem appealing (especially to a bargain hunter!) they don’t always save you the most money. Retailers have been known to inflate original prices to make discounts seem larger than they really are. They also make their sales seem like a one-time only deal but in reality offer the same discounts throughout the year. Don’t be fooled.
Follow these five helpful tips and give yourself the gift of enjoying the holiday season debt-free!
Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York. He provides guidance and strategies to improve clients’ financial well-being.