Many people overspend on gifts during the holidays, and slow down or even ignore their savings as a result. With that in mind, here are three ways in which consumers can avoid a “shopping debt hangover” this holiday season:
- Set a budget. The best way to avoid a holiday spending hangover is to set a budget you can afford. Taking advantage of holiday sales can be a great way to save, as long as you plan in advance. Don’t fall victim to buying something entirely because it’s a good deal—people who do this often spend more overall. Take the time to determine a budget that’s reasonable for you and once you have, stick to it.
- Pay for gifts in cash, not credit. It’s never a good idea to carry a large balance that you can’t pay off for years. Unless you plan to pay your holiday shopping charges in full by the due date, avoid using credit. The interest rates can quickly become insurmountable, and a lower credit score can hurt you when you’re making a down payment on a house or vehicle in the future.
- Continue to save toward retirement. While everyone has added expenses during the holidays, they should not interrupt your monthly savings goals. If it looks like they’re going to, you may want to reassess your projected spending. It takes a lifetime for a proper retirement portfolio to grow, so the more you save now, the more you’ll have later in life thanks to compound interest. The holidays shouldn’t be a time to derail your retirement plan.
Taken together, these tips present a significant opportunity if handled properly and a significant risk if ignored. By approaching the holidays with a sense of fiscal responsibility, you can position yourself for a strong start in the New Year.
–Matt Loverine, CASL, is a financial professional based in Milwaukee with the MetLife Premier Client Group.