Consumerism reaches a fevered pitch during the last quarter of the year, when the holidays fuel increased spending on everything from dining and entertainment to gadgets to toys. It can be easy to get swept along during the season of spending and fail to pay attention to budgets when the urge to splurge on loved ones sets in. However, failure to take inventory of where money is going can leave individuals facing some unwanted financial repercussions come the new year.
Spending beyond their means is something many holiday shoppers fall victim to. Perhaps they didn't accurately budget for the year, or surprise purchases crop up, pulling resources away from holiday allowances. That's when credit cards can become so attractive, and potentially dangerous.
A 2014 survey from Accenture, a leading global professional services company, found that most people make a budget for holiday gift buying, but nearly half exceed their budgets anyway. Buying with credit cards makes overspending easy. Consumers who want to avoid holiday debt can take a proactive approach and explore some other financing options this holiday season.
Layaway
Various retailers have reinstituted layaway policies to make it easier for shoppers to buy holiday gifts. With layaway, instead of paying for an item all at once and leaving with it the same day, shoppers pay a percentage of the cost of the item. In the meantime, it is held in layaway. Once an item has been paid for in full, the merchandise is free to leave the store. Spacing out payments can help shoppers avoid overspending, and many stores do not charge interest fees on layaway purchases.
Holiday clubs
Financial institutions may offer savings clubs that can help people save for holiday spending over several months. The "club" is simply a special short-term savings account set up to encourage holiday saving. Many such accounts can be opened with a nominal deposit. At the end of the term, the money can be withdrawn and used for holiday purchases. Shoppers likely won't miss the small amount of money being set aside each paycheck, but are surprised to see just how quickly savings can add up.
While some banks still offer Christmas club accounts, which reached the height of their popularity in the 1970s, today they are most commonly offered by credit unions. According to the Credit Union National Association, or CUNA, nearly 72 percent of credit unions run Christmas clubs, and consumer interest in these clubs is holding steady.
Credit card perks
Smarter credit card usage during the year can be handy come the holidays. Choose cards that will yield cash back or other perks, such as discounts at certain retailers. Also, be sure to pay the balances off in full when the bills arrive, so as not to rack up high interest charges throughout the year. Use the cash-back rewards you accumulate during the year as a holiday spending allowance.
Holiday shoppers can implement a few saving and spending strategies to avoid going into debt this holiday season.
