6 Tips to Steer Clear of Holiday Debt

Spending season is upon us. As you start putting together that holiday shopping list, make sure you’re also paying attention to your budget. ‘Tis the season to splurge, but that doesn’t mean you have to deal with a debt hangover come New Year’s.

The National Retail Federation reports Americans spent an average $730 on gifts, food, decorations and other holiday-related purchases in 2013. If you haven’t been able to save close to that amount for this year’s holiday purchases, you will need to be even more vigilant about where those hard-earned dollars are going.

Use these six tips to steer clear of holiday debt:

1. holiday debtPrepare a spending plan instead of a gift list. A gift list is helpful for prioritizing your spending but doesn’t account for decorations, food, entertainment and last-minute supplies. Prepare a spending plan that lists all of your tentative holiday purchases, and set a time frame for purchasing them. Keep in mind that retailers will be running holiday deals and specials during the few weeks leading up to each holiday, and you may be able to snag some last-minute deals if you delay some of those purchases. So plot your holiday shopping calendar accordingly.

2. Leave the credit cards at home. Even if using your store credit card will give earn you a discount or you will rack up credit cards rewards points with your next purchase, resist the urge to splurge with credit. Plan all your holiday spending with cash, and take the time to shop around for the best deals. Using your credit cards – even if you have good intentions to pay them off before month’s end – can be a risky game in the midst of the holiday hustle and bustle when you might forget to make that extra payment.

3. Shop online first. As you put together your spending plan, check out the inventory online to get an idea of current prices and determine whether placing an online order might end up saving you time and money. You could be eligible for free shipping, find online-only discounts and save money on gas to get to and from the store. Stick with your list, and make sure to pay with a debit card or electronic check so you aren’t adding to your debt load.

4. Keep track of holiday spending as you go. Create a running budget – or use a budgeting app – to track all holiday-related purchases so you have a fair idea how much you have already spent and can spend to stay within budget. Your spending plan needs to be flexible enough to accommodate some extras, but you can also tabulate any savings you hadn’t anticipated along the way. Keeping a running total will make you more conscientious about your spending and may make it that much easier to avoid reaching for a credit card.

5. Save with text message promotions. Many retailers run special offers and “one day only” promotions throughout the holiday season with text message offers. You can sign up for alerts to cash in on single-day discounts and instant offers that will pare down the cost of your purchases. Keep your eyes peeled for text message offers at your favorite craft store, clothing stores and even outlet malls throughout the holiday season.

6. Avoid installment payment and “easy pay” plans. If you’re an avid TV shopping network shopper and have your eyes on a new television, computer, jewelry or other big-ticket items, avoid the temptation to sign up for an installment plan. Installment payment and “easy pay” plans may seem like a simple solution for managing the costs of that high-priced purchase, but they can be deceiving – most shoppers end up using their credit card or debit card to set up the installment arrangement. As those payments come out of your account over the next few months, it’s all too easy to forget to include that extra purchase in your budget. Only buy what you can afford with cash (or funds currently in your checking account), so you don’t set yourself up for a heavy debt load in the new year.