This time of year, dubbed the giving season, often brings along a coal in the stocking: debt. Shoppers spend so much effort buying the perfect gifts that it leaves them in a financial bind come the New Year.
Maybe it speaks to the large hearts of family, but it’s not the type of surprise to have on the bottom line. And this year’s no different. WalletHub found that the average person will spend $935 this holiday season. Double that for a couple, and the mark reaches over $1,800. It’s easy to expect it will rise far above that average for many homes.
But a happy holiday shouldn’t equate to financial stress. In order to keep the post-holiday hangover at a minimum, here are some strategies to protect the bank account this year.
[See: The 25 Best Blue-Chip Stocks to Buy for 2017.]
Plan out who to buy for. Heading to the mall without a list can spell doom for the budget. Without knowing who to buy for and what they will get, a scramble unfolds in the stores. This inevitably invites overspending.
Jean Wilczynski, an advisor at Exencial Wealth Advisors in Old Lyme, Connecticut, suggests coming up with multiple gift options for each person in order to guarantee a backup plan if the stores run out of the first choice.
“Even if you can’t find the one thing, you don’t panic,” she says. “You have other options.”
Don’t forget to also account for shipping expenses. It’s very possible to shop the season without stepping foot in the store, indicated by the fact that 44 percent of shoppers chose to buy online for Black Friday. While convenient, this leaves the possibility that the checkout comes with an extra, unexpected shipping cost. For larger items, this can run more than the actual gift itself.
Figure out the non-negotiables. Have that one must-have for the holidays? For some, it could mean needing to get on a plane to visit family. For others, it could mean needing to decorate the home as bright as an airstrip. Whatever that non-negotiable must have is, make sure to plan for it while determining the holiday budget.
“Everyone wants to create a perfect holiday,” Wilczynski says. First, take a step back and determine “what do I already have? Do I really need to go out and go crazy?”
Whatever the non-negotiable is, use the budget to purchase that item, whether it’s for travel or decorations. Next, particularly for those that like to light up the house, determine what items have collected dust in the garage the last few years. Dusting off the older decorations will keep the spending on new decorations down. And if new decorations will top the list next year, wait until the end of the season, when all the Christmas gear hits clearance.
[See: The 7 Best Bank Stocks to Buy for 2017.]
Avoid credit card debt. One of the more damaging mistakes shoppers make isn’t seen until months later. WalletHub expects that 2016 will end with a net increase of $80 billion in credit card debt, with the average amount owed reaching $8,380 per household. Putting the holiday shopping on a credit card that isn’t paid off in full can leave gift givers continuing to feel the holiday crunch for months to come.
When John Piershale was younger, he would put all the money he would use towards holiday gifts in an envelope. Once the envelope was empty, then he could no longer give any more gifts. This forced him to plan out what he gave and to whom. Now, a financial advisor at Piershale Financial Group, he suggests people use the same idea, but through pre-paid cards. This “creates a cap or limit on what you can spend,” if there’s no more shopping once the card is emptied, says Piershale.
Use your credit cards wisely. Now, Piershale uses the perks of card ownership to his advantage. Using a cash-back card, he puts practically every purchase on the credit card and pays off the card in full every month. This leaves him with nearly $1,000 back each year. That can go into a bank account, specifically for holiday gifts.
“A credit card is a blessing and a curse,” says Piershale. “As long as you pay it off each month, it can bring really good things.”
When selecting a cash-back card, just make sure the annual fee isn’t eating all the return. Look for options that don’t have any fee. If there’s one, ensure the cash-back rewards will more than cover it.
Limit the number of gifts for each child. A 3-year-old could receive an entire closet full of gifts and clothes from her parents, grandparents, aunts, uncles and so on.
Instead, set a limit on how many toys and clothes a child can receive. A more lasting gift is to set up a 529 college savings account that will help pay for college and build, thanks to compounding interest, 15 years of returns.
If grandma still wants to see the unwrapping, “take a picture with the check,” Wilczynski says. A young child “will get as much joy” from tearing into the wrapped photo.
Start planning for next year now. Saving for the holidays is about planning ahead. When budgeting, make a list of everyone that needs a gift. Approximate the amount to spend on each person, and add it all up. This will be how much to save for next year.
[See: 8 Ways to Get Kids Interested in Saving Money.]
Then divide that number by 12. Each month, automatically deduct that amount from the checking account into a separate bank account (assuming there’s no fees for the account). Then when the holidays come around, the account can be tapped for all the stress-free shopping.
More from U.S. News
These IPOs May Be Huge Hits in 2017
7 of the Best Stocks to Buy for 2017
9 ETFs to Buy When the Market Tanks
6 Ways to Avoid Debt This Holiday Season originally appeared on usnews.com
