The Christmas season is a joyous time, but for many it is filled with the pressure of playing Santa for a host of people, including children, relatives and co-workers. The obligation to spread holiday cheer is too great for many to bear. Some pull out their assortment of credit cards to spread joy and happiness. The end result, for most, is another year deeper in debt.
Christmas 2012 may seem as if it’s a long time away, but time passes quickly and the holiday season will be here before we know it. In that vein, here are some tips to help you prepare for holiday gift buying and to avoid excessive debt come January 2013.
● Develop a realistic budget. There is no way to escape this truth. Strong budget planning is your first line of defense against debt and overspending. Start now and make this your top priority.
● Limit interest debt. Interest determines how much you pay toward debt repayments and how long it takes to pay off debts. To limit the adverse impact of interest debt, you should double the minimum payment. For example, if you have $1,000 in credit card debt with an interest rate of 20 percent, it will take you about 10 years to pay off the debt if you pay only the minimum payment. However, if you double the minimum payment each month, it will take you approximately two years to pay off the debt.
If you are one day late with a payment, credit card companies may raise your interest rates. If possible, commit extra money derived from tax refunds, pay raises and money saved from paid-off credit cards to your holiday budget.
● Return unused items. It is still early enough in 2012 to return items. If you do not think you are going to use an item, take it back to the store and get a refund. There is no point in holding onto gifts while financing other gifts charged on a credit card.
● Gift cards. Consumers are expected to purchase upward of $25 billion in gift cards. Make every effort to adjust spending habits by utilizing gift cards before using cash or credit cards. Gather your gift cards and use them.
● Now is the time to pull your credit report and see how creditors view you. The official government site to help consumers obtain a free credit report is www.Annual CreditReport.com.
Finally, in order to minimize debt, each person must curb his or her spending and consider alternatives to traditional holiday giving. Now more than ever, it is important to adjust spending habits.
Oliver J. Adams is president and CEO of Buyers Credit Coach Inc. in McDonough.
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