Avoid the January Christmas Credit Card Debt Hangover

Each January, millions of Americans endure the debt hangover that results from financing Christmas shopping with credit cards. Unless you have the cash to pay off the balance immediately once the statement comes in January, Christmas credit card debt can become a burden that can last well beyond the Christmas season.  According to Bankrate.com, if you racked up $1000 in Christmas credit card debt financed at 19.9% and paid just $100 per month toward the balance, it will take you until next November to pay it off.

This year, resolve to avoid the January Christmas debt hangover! You can do that easily by planning ahead now.

Start By Setting a Spending Budget

The best way to avoid overspending on gifts is to set a budget ahead of time for each person on your list (make sure you stick to it!). Take a few minutes to write down the names of the people likely to be on your shopping list next year and the maximum amount you want to spend  on them. Add a separate line and dollar amount for additional expenses such as Christmas cards, mailing expenses, and holiday cooking or entertaining expenses.  If you’re going to be traveling for the holidays next year, it might be worth adding a line for travel expenses. Now, total everything up and divide by twelve. This figure is what you’ll need to save each month between now and next Christmas so that you’ll have the cash on hand to cover your holiday expenses.

Set up a Christmas Savings Fund

Now that you have a monthly savings figure, plan to begin setting aside this dollar amount each month over the course of the next year. Ideally, set up an auto draft from your paycheck or an auto transfer from your checking account into your Christmas account to automate your savings plan. If it’s automatic, you won’t need to remember to save each month and it will help enforce savings discipline.

And don’t touch this money! You know you’re going to need it next Christmas, so it’s important to learn to live without it in the meantime.  You don’t want to be in the position of having to endure the Christmas debt hangover again, right?

Save Time And Money By Shopping Online

Consider shopping online next Christmas to save gas, time, and money. Great deals on Christmas gifts can be found on websites like Slickdeals.com, Overstock.com, and Amazon.com.  Instead of driving all over town and enduring the crowds, shop online and have your entire order shipped directly to your door – often for free, depending on how much you spend.

Shopping online also makes it easy to compare prices between retailers to make sure you’re getting the best deal for your money.

Again, resolve to avoid the Christmas debt hangover next year! A little planning and savings discipline between now and next Christmas can go a long ways to making the holidays much more enjoyable and less financially stressful.

Best wishes to you and yours in 2011!

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About Mark Fitzpatrick

Mark Fitzpatrick is a reverse mortgage professional with over seven years of experience in mortgage banking. In his spare time he enjoys reading, skiing, surfing, and spending time with his family and friends. You can stay current with Mortgages By Mark by getting free email blog updates or subscribing to my RSS feed. NMLS #382064.
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