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The holiday season is a time of parties, decorations, gift giving — and debt.
Unfortunately, long after the snow has melted and the trees sprung back to life, many people will still be paying off the credit card debt they used to buy yet another sweater for their father and a George Foreman grill for that tough-to-buy-for uncle.
Last year, the average American spent $1,558 during the holiday season — and that was with consumers worried about the economy — according to the International Mass Retail Association. Now, spending that amount of money on gifts and parties would be just fine if we all had $1,558 stashed away for the holiday season. But, of course, most Americans don’t have a special holiday fund and end up spending more than they have in their bank account.
So how do consumers square the circle of spending more than they have? Why, credit cards, of course. (By the way, anyone who didn’t know the answer to that question should really consider giving up their American citizenship and moving to a more responsible country, like Japan.)
Debt counselors say that many of their clients are still paying for Christmases past — many years past. Like some warped version of A Christmas Carol, people are being visited by the ghosts of Christmas past, except, in this case, the ghosts are demanding a check.
Remember, it doesn’t do you much good to shop for Christmas sale items if you’re going to rack up long-term credit card debt to buy them.
For example, suppose you ran around the outlet malls searching for bargains and were able to buy $1,100 worth of gifts for $1,000. But you put the $1,000 on your credit cards, and it took you until next Christmas to pay it off. If you had a card that charged 18 percent, you would end up paying nearly $100 in interest, wiping out any savings from buying the gifts on sale.
Here are some tips to avoid a holiday spending hangover:
Take five minutes and think about this question: How much money seems like a reasonable amount to spend on gifts, decorations and hosting parties this year. Whether you answered $100 or $10,000, you now have a general budget to work with while shopping this season.
Following these tips will help you have a merry — and affordable — Christmas.
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